This is not to say we have political clarity over what comes next: there is still too much road to be travelled for that. But I do see investment returning, business decisions being made, and signs we are pushing on. Here’s why – essentially because we already know more than we think we know.
(1) Our future trading relationship(s)
On the face of it, the nature of our future trading relationship with the EU is unclear. Prime minister Theresa May has ruled out our being a member of the Single Market, as well as our being a member of a customs union. That seems to leave us with two main alternatives.
One is that we have no customs arrangements with the EU and we are free to make whatever deals we like with the rest of the world. The second is that we put in place a bespoke arrangement such as a mutual recognition regulatory agreement. We should know more on this front pretty soon if recent reports are to be believed.
(2) Post-Brexit convergence
If we are out of the Single Market, and have not signed up to any customs union with the EU, it would be fair to say there will not be full alignment between our legal system and Europe’s. But I would expect convergence to be key. From a business perspective we will have much to gain by ensuring our systems are as close to the EU’s as possible, without disappointing those who felt there was much to be gained by cutting our ties.
(3) Financial services
Financial services accounts for some 12 per cent of the UK’s economic output and employs more than one million people. It is an incredibly important sector. We now know the scare stories circulating in the immediate aftermath of the referendum about thousands of jobs transferring to rival European financial centres have not been realised. Nor does that spectre look realistic for the future.
Goldman Sachs’ CEO, Lloyd Blankfein, may have suggested he was to spend more time in Frankfurt, but rival UBS, for example, now says only 200 jobs will go to mainland Europe. That is not to say there will not be job losses. But a wholesale clearout is looking unlikely in the near future.
A recent Reuters survey of City banks and insurers found that whilst some 10,000 jobs may relocate because of Brexit, that would still only represent around 0.5 per cent of London’s total office space. We are also seeing growth and increased investment in areas such as fintech, which suggests the City and our financial services industry will continue to evolve.
(4) Sterling and economic growth
A further indication that we are returning to some sort of normality is the growth of sterling, which crashed by about 20 per cent following the referendum vote in 2016. Economic growth forecasts of only 1.4 per cent for this year, in contrast, remain a real concern. Yet although our growth numbers are unlikely to reach the same level as they would have had we remained within the EU, the sort of negative numbers predicted in the immediate aftermath of Brexit probably won’t materialise.
The world is certainly not going to continue post-Brexit as before. But we can’t wait for politicians forever. We do actually have a better vision as to how things are likely to shape up once we leave the EU. The Armageddon type scenario is, for many, no longer on the agenda. Businesses are returning to decision making, investment and moving forward, ironically adopting a very British keep calm and carry on approach.
Richard Fox is co-chair of Kingsley Napley’s business service group.
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