Thanks to Brexit, an impending general election and signs of a stuttering economy, it’s a potentially sticky time for UK businesses. Here’s how to trade in a time of uncertainty
By Ernest Richardson
When the UK electorate voted to withdraw from the European Union, it kicked off a period of considerable upheaval. Not only was the country faced with uncertainty about the implications of Brexit, but within the space of a few weeks there was a new Prime Minster and cabinet, as well as the instability of a Labour leadership election.
Needless to say, events on the world stage didn’t do much to steady the ship. First there was the US election, followed by polls in Holland and then in France.
Now, with Prime Minister Theresa May calling for a clear mandate to negotiate Brexit, the UK faces its own general election in a few days – just two years after the last one.
All of which makes for a time of some uncertainty in the UK business community. And while the economy seems stable enough, with solid growth, low unemployment and steady inflation, there are signs that things will degenerate in the months and years ahead.
For example, the Office for Budget Responsibility (OBR) predicts that growth will slow in the next two years, as businesses hold off investment until they see the outworking of Brexit in 2019. This is likely to have a knock-on effect on the employment rate, which is already showing signs of moving in the wrong direction, and on consumer spending.
But, of course, predictions can be wrong. Consider the sustained growth in GDP in the months following last June’s EU referendum, which confounded expectations that a leave vote would result in almost instant economic meltdown. In fact, the weakened pound has benefitted many exporting businesses, making their goods and services appear cheaper overseas.
So while the augurs don’t look promising, it’s too early to write off sustained economic wellbeing over the coming years. What’s more, the economy’s resistance to volatility in the aftermath of Mrs May’s triggering of Article 50 in March lends further credence to the view that things may yet turn out all right.
“We’re at a time the like of which I can’t recall in more than 30 years in business,” comments Peter Foy, a director at Just Recruitment Group Ltd. “It’s not that we’re staring down the barrel of a tough trading period, or that we can be assured of good times ahead. Rather, no one really knows what to expect between now and 2019, which makes forward planning very challenging indeed.”
Mr Foy has a way of dealing with the tumult, and he says it has served him well in the past. “You have to plan for the worst,” he opines, “without being any more cautious than you have to in the here and now. For example, Just Recruitment has always had a policy of saving capital to weather financial storms. This gives us a safety net if things go awry, meaning we can make bold but considered investments now, knowing we’ve effectively de-risked them through our careful financial planning.”
There is another imperative for companies that are continuing to enjoy good times, and that’s to make sure recession doesn’t become a self-fulfilling prophecy.
“It’s tempting to tighten belts and rein in spending when the future is uncertain,” says Mr Foy. “But that’s no good for the economy. To my mind, businesses have a duty to keep investing all the time they’re doing well. That creates jobs, stimulates spending, and serves as an engine for growth.”
What is more, wise investments can help businesses prepare for whatever the future holds, by spreading their risk with a more diverse trading portfolio.
“It’s actually a good time to invest in business development,” Mr Foy points out. “Interest rates are at a historic low, and thanks to the National Planning Policy Framework of 2012, the government has a very positive attitude towards planning for buildings and developments. So now is the time to pursue your next big idea.”
Indeed, Mr Foy says that investment now may yield additional benefits later, strengthening businesses so that they are better placed to weather any negative fallout from the UK’s exit from the EU in 2019. “Trade now would be my advice. Then, if international tariffs make it harder to sell goods and services overseas, or a recession makes conditions tough, you’ll have a more robust business that can survive hard times.
“And, if the worst doesn’t happen and all goes well in the economy,” he concludes, “you’ll have even more reason to celebrate. You’ll have a flourishing enterprise in a flourishing economy. Very few businesses would be anything less than happy with that.”
© 2017 Just Recruitment Group Ltd.
Posted on Monday Jun 5