Brexit - after the referendum, what next?

6th of December 2016
Brexit - after the referendum, what next?

It would not be unfair to say that the Brexit referendum result came as much of a shock to the people who voted for it as it did to Britain’s EU partners, writes Hartley Milner.

Having cocked a snook at the EU at the polls, a goodly number of citizens were now feeling less cocky about the wisdom of their decision. Had their revolt against the “non-Democratic, dictatorial and cumbersome” Brussels institutions just helped push the UK’s economy towards a cliff edge?

Perhaps the ‘remain’ camp had been right all along with their scary prophecies of European trade barriers, thousands of jobs lost, a house price crash and a gaping ‘black hole’ in public finances sucking in funds away from state pensions and Britain’s beloved National Health Service.

Prime minister David Cameron had warned Brexit would “put a bomb under our economy”, adding: “The worst thing is we’d have lit the fuse ourselves.”

Seeing cracks in the European project, angry EU leaders had been quick to add their condemnation, warning that a ‘leave’ vote would mean British citizens losing their right to move freely, work and do business within the largest economic market in the world. Britain would be sidelined in future lucrative trade deals struck by the EU with the rest of the world.

Up to seven per cent of people who voted for a Brexit regretted their decision, according to one of a plethora of gloomy polls that came out in the first few weeks after the June 23 referendum. Not a few said they had only marked the ‘leave’ box as a protest against unrestricted immigration, never really expecting to carry the day.

When the survey’s findings are projected on to the vote, it would cut the ‘leave’ share by 1.2 million, almost wiping out the majority that gave the surprise 52/48 per cent result. More than half of those surveyed also felt both the UK’s economy and position in the world had worsened, but almost one in 10 said they did not believe Brexit would be implemented.

However, in a more recent poll, conducted by ComRes, 62 per cent of the 1,032 British adults canvassed said they were positive about Britain’s future post-Brexit, and had not reined back significantly on their spending.

Consumer confidence

This was borne out by other consumer spending figures. The YouGov/UK consumer confidence index showed that confidence improved to 109.8 points in August, up by 3.2 points from 106.6 in July. This was the highest monthly bounce seen since February 2013 when it rose by 3.5 points after the UK economy performed more strongly than expected. August’s rise in consumer confidence follows a sharp fall in July.

High street sales rose by 1.4 per cent in July, more than reversing the 0.9 per cent drop in June, according to the Office for National Statistics. It was much stronger than the 0.2 per cent increase predicted by economists and echoed industry reports of solid growth in consumer spending. Warm weather and a plunge in the value of the pound providing a boost to tourist spending were attributed as prime reasons behind the jump in retail sales volumes.

But it was how far the pound would stretch abroad that was of concern to shopper Dawn Jacklyn when ECJ caught up with her in a west London high street in September. The ‘remain’ voter had just booked a break for herself and her husband in the south of France to escape the looming UK winter and was now hunting for leather travel bags.

“At one point, I had actually considered voting to leave the EU because I think this island of ours is becoming too crowded with all the people pouring in from overseas,” she said. “But then my
husband reminded me that the company he works for is heavily dependent on exports to the EU, and anyway we like our holidays abroad and I could see that a fall in the value of the pound resulting from leaving would make going abroad more expensive.”

She added: “As it turned out, I think people are now wondering what all the fuss was about. None of the scary things we heard Cameron and others say have happened, well, not so far. People seem to be going about their lives much as before. We Brits can be a bloody-minded lot and we don’t like being dictated to by politicians here or abroad. Whatever happens, we will see it through. It’s just the British way.”

Businesses were also more optimistic about their outlook. The YouGov/UK business confidence index climbed to 109.7 in August from 105 in July. The poll, compiled from more than 500 interviews with key decision-makers at companies, revealed that 48 per cent were optimistic about their prospects for the next 12 months in August, up from 46 per cent in the previous month.

Director Scott Corfe said: “The dust is settling on the EU vote and businesses are showing signs of resilience, for now at least. With the post-Brexit panic abating and many indicators signalling a reasonably robust short-term outlook, businesses are suggesting a greater confidence for the coming 12 months when it comes to their own operations.”

Rebound in manufacturing

Particularly encouraging was the record rise in Britain’s service industry in August. The Markit/CIPS purchasing managers’ index rose to 52.9 after slumping to 47.4 for July following the vote to leave the EU, well above the 50 mark that indicates growth. That was the biggest month-to-month jump in the survey’s 20-year history and followed the biggest drop on record the previous month when businesses were coming to terms with the outcome of June’s referendum.

The services report follows news of a similar rebound in the manufacturing sector and a more modest improvement in the construction sector. Taken with signs of a recovery in consumer confidence and high street spending, it will allay fears that economic growth is grinding to a halt after the referendum.

Our high street shopper had been found browsing the suitcase range at an Antler luggage store. Manager Don Warren saw a sharp drop in sales immediately following the Brexit vote.
“It was much as we had expected – customers were putting their purchasing plans on hold for other than absolutely essential goods such as foodstuffs,” he said. “They were not booking holidays and so did not require our bags, or they were still planning to go away but were making do with their old luggage.

“We were heartened to see business picking up in late July and August, though not to pre-referendum levels. With autumn approaching, holiday booking tends to tail off in any case, which obviously affects luggage sales. We will have to see how Christmas and New Year holiday bookings shape up to get a better idea of our position. But we are cautiously more hopeful than we initially were.”

After ailing for decades due to competition from cheaper imports, even Britain’s manufacturing output showed a small improvement in August, according to the Confederation of British Industry’s monthly industrial trends survey.

The survey of 505 firms found that export order books reached a two-year high, suggesting that the depreciation of sterling since the end of last year may be feeding through to stronger overseas demand. Chemical manufacturers accounted for just over half the improvement in export orders, with less than one-third of the 17 manufacturing sub-sectors reporting export orders at below normal levels.

Another hopeful indicator is the housing market, which had been prophesied for a slump following the EU referendum. House prices were flat for a few weeks before climbing again, albeit more slowly than before. Now, the Royal Institute of Chartered Surveyors (RICS) is predicting a 3.3 per cent a year rise in prices for the next five years, noting that conditions in the market have “settled down” after the uncertainty of the Brexit vote.

RICS also says the number of properties being bought and sold in the UK dropped sharply after the referendum, but has now stabilised, with confidence returning after the Bank of England’s economic interventions.

Period of calm?

But while it appears the UK has settled down to a period of calm and renewed self-assurance, many economists are stressing that the full impact of the Brexit vote has yet to be felt.

The YouGov/Centre report points out that while 48 per cent of businesses surveyed said they felt positive about their prospects for the next 12 months, 45 per cent had a more pessimistic view of the future.

Stephen Harmston, head of YouGov Reports, said: “For the most part, the panic we saw straight after June 23 has been replaced by calm. In the short term at least, a more positive outlook from businesses and consumers will help grease the wheels of the economy – spurring spending and investment.

“What happens in the longer term is the big mystery. Once the UK shows its hand on Brexit and invokes Article 50 things could change for the worse very quickly.

“But as businesses and consumers don’t know when this will happen, they have seemingly decided to just get on with it.”


Our Partners

  • ISSA Interclean
  • EFCI
  • EU-nited