Tim Sarson, Tax Partner, discusses the business impact of the international attention Britain has faced during Brexit negotiations.
“Will the Brexit Horror never end?” was the splash on Germany’s Bild this morning after EU leaders’ granted the UK a Brexit reprieve until Halloween. The story is all over the TV and radio across Europe. Audiences might have taken a couple of years to warm up to the Brexit story, but thanks to the increasing sense of drama, farce and standout performances from Commons Speaker (and YouTube sensation) John Bercow, Britain has become box office.
I felt a little of this fascination in Copenhagen this week as amused colleagues and clients huddled round to ask, “Exactly what is going on with your country?”
The question for British society and our economy is whether this new-found notoriety matters. Presumably the merry-go-round of global news will return to Trump and the Kims (North Korean and LA versions) and today’s Brexit front pages will become tomorrow’s chip paper? I’m not so confident we can dismiss it that easily.
I spend a lot of life at work helping companies decide on where to base operations so I know foreign executives pour over a series of ‘hard-headed’ factors in forming a view: tax rates (and breaks), legal systems, education levels, R&D facilities, transport links and so on. I also know decision makers are human beings prone to the same emotions, stereotypes and prejudices as the rest of us.
Until recently, foreign investors have smiled upon the UK, putting us in the ‘strong, stable and pragmatic’ bracket along with the likes of Ireland, The Netherlands and Switzerland while other nations are (often unfairly) pigeon-holed as hot-headed, work shy, incompetent, corrupt or just plain dull.
But now, thanks to that increasing global focus on the Brexit story, a growing number of non-Brits look upon us with a mixture of horror and sheer bewilderment (much as we feel, ourselves, watching the nightly news). With every parliamentary bunfight, offensive tweet or political change of tack, Britain’s shiny image is scratched again.
Our conversations with company bosses outside the UK suggests that a significant proportion are now less likely to invest here as a result of Brexit. And I know from first-hand conversations with executives from the US and elsewhere that many are all but ignoring the UK as a possible location for future investment right now. Brexit is rarely cited publicly as the reason (there’s little PR upside in doing so), but based on my interactions it’s very much part of their thinking. A 2018 report from Sussex University’s UK Trade Policy Observatory estimated that “… the Brexit vote may have reduced the number of foreign investment projects to the UK by some 16-20 per cent”. That may be purely because executives fear a loss of access to the Single Market, but I get the impression that some boards are simply saying, “The UK doesn’t feel like the right move at the moment”.
Wednesday’s agreement may mean we drop out of the global spotlight for a short time, but it won’t solve the underlying problem and restore our reputation. This latest political extension only delays the parliamentary battles to come or heralds even more turbulence if it comes to a general election or second referendum. The narrative that Britain is stuck on Brexit and can’t move on to address deeper issues around sustainable growth or productivity will persist.
I fear that the only way to restore the gloss to our reputation is an extended period of calm once we have settled this issue once and for all.
When that happens – and it will one day – it will be the job of us as citizens and business people (just as much as government) to point to our strengths as a nation. Negative narratives can stick if not confronted, however they can also change with remarkable speed. Think how quickly perceptions of the UK were transformed from a ‘broken society’ after the 2011 riots to ‘soft power superpower’ after the 2012 Olympics.
Looking for upsides before then? Well just remember next time you’re overseas and need an icebreaker with foreign hosts: Brexit will be the gift that keeps on giving.
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