So, nearly two weeks after the political earthquake of the leave victory the aftershocks continue to reverberate. The Government is in a state of flux as the Conservative party leadership election gets underway (voting in round one has started as I write this). The bookies favourite Theresa May looks set for victory but then again we all know the bookies aren't always right. The opposition (I use the term advisedly) is in some sort of Mexican standoff. The Liberal Democrats are clamouring for airtime with the promise of a second referendum. Oh, and the man who started this seismic activity all those years ago, Nigel Farage, has decided his work is done and is off for a ’well-earned‘ break. Even Chris Evans has resigned.
No one can say the last couple of weeks have been dull. But what does all this mean for business? What do we see on the front line of business as organisations consider their strategic plans; their aspirations to grow; their funding needs and their (and by definition our collective) economic future. Well, it is not quite business–as-usual. What is comforting, at least for the moment, is that the financial markets have operated as they should. Yes, stock, currency, bond markets all fluctuated wildly as the price ’discovery’ mechanism attempted to work out the winners and losers but after the initial turmoil, we seem to have come through into a period of at least relative calm. However, we have definitely seen signs of decision-making altered by the vote. We have seen some transactions fail, more paused and some alteration of terms on other deals to try to recognise new perceptions of risk and reward.
We do have some clarity now. In the short and even medium-term there will be little change to the rules and regulations within which business operates. Article 50, which is effectively a trigger for a two-year countdown to a supposed exit, will not be pulled for some time. Even when it is, it is very conceivable that the negotiations will take (and will be allowed to take) much longer than two years. In all of that time there is ample opportunity for some reversal of course. If, and probably only if, it seems crystal clear that the public have changed their mind then it is possible to see the politicians working their way towards a more constitutionally acceptable second referendum. Alternately, we could see an exit that isn't so different from what we have now. Therefore, it is possible that those anticipating a major change may be disappointed. On the other hand, there are clear signs of tension with our European partners and there is a substantial pressure to adhere to the democratic choice of the people and so a harder Brexit is also feasible.
So the only certainty is uncertainty for the next few years. I expect most future deals to have a Brexit planning aspect inherent in their forecasts and plans. It would be foolish not to consider the possibilities, although therein lies the problem: like the shopping experience of all spoilt Western consumers, there are many flavours of Brexit to choose from and therefore planning for it is easier in the saying than the doing. Businesses that are looking to attract funders will need to demonstrate how they anticipate various Brexit scenarios will affect them and how they can adapt and flex their plans accordingly. If they fail to deal with these legitimate questions they should expect to fail to achieve the result they want.
Yes, there has been an earthquake. Yes, there will be a number of aftershocks in the months and years ahead. But no, the world of business in the UK is not about to end. Although for remainers (I am one) we may feel some regret but the hope must be that our government is not run by a Little Britain team intent on recreating the past. What's done is done, the situation will evolve, one can expect that minsters and their teams will focus on trying to create the best possible business environment for all of our collective sakes.
Already, just two weeks in, the combination of a more competitive currency, further improvement to the business taxation environment promised by the chancellor, a relaxation yesterday by the Bank of England’s Financial Policy Committee of the countercyclical capital buffers that apply to the banks (try saying that after a couple) and some austerity baggage discarded (such as the economically illiterate inclusion of investment in the balanced budget mantra) give grounds for hope that there could be a bright future after all.