ACT Conference 2017: Brexit - the gift that keeps giving
Day One of the UK Association of Corporate Treasurers' annual conference in Manchester emphasised how last June's referendum vote will dominate the agenda in the years ahead.
Day One of the UK Association of Corporate Treasurers' annual conference in Manchester emphasised how last June's referendum vote will dominate the agenda in the years ahead.
Day One of the UK Association of Corporate Treasurers’ annual conference in Manchester emphasised how last June’s referendum vote will dominate the agenda in the years ahead.
Twelve months ago, the possibility that the UK electorate might vote for the country to exit the European Union (EU) seemed remote. When the Association of Corporate Treasurers held its 2016 conference in Liverpool last May, few members were in favour of Brexit.
What might then have seemed the stuff of fiction became reality only a few weeks later. So it was apt that the ACT’s choice of opening speaker for this year’s conference in Manchester was Lord Michael Dobbs, probably best known as the creator of fictional politician Francis Urquehart – or Frank Underwood in his US incarnation – the star of the TV classic ‘House of Cards’.
Addressing this year’s conference theme, which is ‘Opportunity From Uncertainty’, Lord Dobbs mounted a robust defence of Western society. he noted that it gave every appearance of being in terminal decline, but could still stand tall and retained its ability to achieve great things.
“Sceptics point to global competition and regard it as a threat, yet it means simply that the world isn’t going to sit still,” he suggested. “China’s expansionism is seen as particularly menacing, but it’s a country grappling to deal with the problems created by its success, which include pollution, corruption and large numbers still living in poverty.
“These internal problems are occupying much of the government’s attention. Indeed, a possible Chinese implosion could prove more of a threat than expansionism.”
Lord Dobbs believes that the future shape of society will largely be determined by the post-Millennials, or those born since the start of the 21st century and “whose whole lives have been in a world of uncertainty” from the September 11 terrorist attacks to the global financial crisis.
“They’ve missed out on a childhood of innocence,” he added. “They’re intensively competitive, but they also have lower expectations and smaller dreams. They’re also sceptical of promises made by politicians – which might be no bad thing if it encourages politicians to promise less.”
It is also likely to mean that the importance of politicians declines in the years ahead as “we’ll have to adapt and stop clinging blindly to old ways.” This could “open the doors to chaos”, but equally could encourage societies to open up more to adaption and evolution.
Lord Dobbs also suggested that the West would have to become more adept on working with people and regimes we might secretly loathe. He believes that while post-Second World War trend towards globalisation has come under fire in recent times, trade barriers will continue to fall “as free markets have proved that they work”. He was also optimistic that technology would have a positive effect on the way in which we communicate. With more common points of understanding resulting, ‘soft power’ might be able to achieve more than military power.
The post- Article 50 world
The vexed issue of the UK’s future after it exits the EU was tackled head-on in a morning session from Dr Monique Ebell and Paul Watters.
Dr Ebell is associate research director at the National Institute of Economic & Social Research (NIESR) a body set up shortly before World War II by the top economists such as John Maynard Keynes. Since early 2015 when the referendum was first announce, the NIESR has been assessing the economic implications of Brexit and specifically how much trade stood to be lost.
Among the sobering statistics is the potential for the UK to lose up to 60% of its goods and services trade with the EU if efforts to negotiate a new trade deal with the eurozone proved a total failure.
Dr Ebell suggested that the UK could usefully look to Israel, a country surrounded by a number of relatively wealthy markets but unable to trade with any of them. However, Israel’s burgeoning technology sector has worked well for its economy as much of the resulting trade in tech research and development (R&D) is hidden and the UK could also help itself by developing its R&D activities.
Waters, head of corporate research at Standard & Poor’s (S&P) Global Ratings agreed that the UK’s impending departure from the EU marked an “ambitious project” in which its future prosperity would be supported by becoming “a more high-value link in the global supply chain.”
S&P foresees three potential Brexit scenarios for the UK. The first is a “cliff-edge scenario” in which the country fails to achieve any agreement with the EU by March 2019 and consequently loses much of its current attraction as a centre for foreign direct investment (FDI).
The second is one in which the UK achieves a more orderly transition to a new relationship with the eurozone. However, a new free trade agreement (FTA) will not be achieved without cost and will inevitably involve a loss of influence in setting policy.
The third, most promising scenario would see the UK developing into a leading advocate of free trade globally; particularly as it is predicted that 90% of future economic growth will come from beyond Europe’s borders. However, post-Brexit industrial strategy is highly dependent for success on U.K. Retaining its stability to attract skilled workers from other countries.
Asked if the UK could learn lessons from Greece’s bruising negotiations with the EU, Dr Ebell said that the UK was in a stronger position as it had not joined the single European currency and had rather more options.