July 19, 2016
The EU referendum saw a bitterly contested and often ferocious campaign with accusations of lies and scaremongering levied from both Remainers and Brexiters. The arguments only briefly subsided following the vicious murder of Labour MP Jo Cox, just days before the vote – marking one of the darkest days ever in British politics.
The referendum continued, and 72.2 per cent of UK citizens voted on June 23. The result, far from bringing calm to an already tense situation, caused greater turmoil with politicians, media, business leaders and the stock markets, as well as the general public, scrambling to make sense of what the vote for the UK’s exit from the EU actually meant.
In the immediate aftermath, billions were wiped off the value of UK companies and the pound plummeted to its lowest level against the US dollar for decades.
Dean Turner, economist at UBS Wealth Management, reflects: “The result was clearly a surprise on the markets as before the referendum, there had been a lot of positioning for the vote to be remain. The fallout [in the markets] has to be taken in that context.”
He continues: “The numbers look large, especially in sterling, but the markets have settled broadly in line with what we were expecting would happen if the UK did vote to leave the UK. That said, we are probably looking at a period of zero growth for the UK in the second half of the year and investors will be trying to assess what this means for monetary policy in the UK.”
Prime Minister David Cameron swiftly excused himself from dealing with the ramifications of Brexit, in turn delaying the triggering of Article 50 for his replacement, which fuelled yet more uncertainty.
Many assumed the new PM would be the Leave campaign’s figurehead, Boris Johnson, until everything went a bit Game of Thrones when Michael Gove allegedly betrayed him by deciding to run for the leadership himself – and then eliminated in the second round of MP voting.
It is now a head-to-head between Theresa May and Andrea Leadsom and whoever becomes the UK’s second female Prime Minister in the autumn has a mighty task ahead of her.
In opposition, the Labour Party has had its own soap opera to deal with as MPs fell over themselves to resign in protest to Jeremy Corbyn’s lack of conviction and leadership. As I write this, Mr Corbyn remains in post.
The issues of devolved nations also arose again as Scotland and Northern Ireland voted to remain – with much discussion dedicated to whether the Brexit result would cause the break up of the UK.
As the voting was further analysed, it was clear that there were obvious divisions in terms of region and age.
As editor of North East Times, I have watched alongside everyone else what has happened since the referendum result was announced – sometimes through my fingers and with toes curling; the excruciating speech in the European Parliament when Nigel Farage accused members of never having had proper jobs – prompting the now infamous face-palm by heart surgeon Vytenis Andriukaitis behind him – springs to mind.
With the result promising momentous implications for the UK’s economy, I have also tried to gauge the reaction from the business community in the North East.
Before the referendum, I found that while there were those who did support Brexit, the general consensus from our region’s business leaders was that it was more beneficial to remain in the EU. This seemed to have been echoed by North East of England’s Chamber of Commerce (Chamber) which reported around 60 per cent of its members supported remain, and the Confederation of British Industry (CBI) which represents the views of around a third of the private sector workforce in the UK, where 80 per cent of members supported staying in the EU.
Indeed, CBI North East released a statement just before the vote that said staying in the EU would see a further 40,000 jobs created in the North East.*
But a vote to remain was not to be and instead, 11 out of 12 electoral areas in the North East voted to leave. Not even the public chastisement of the Leave campaign by Nissan UK – for using its logo in one of its campaign posters – could overturn a 22 per cent swing in Leave votes in Sunderland. Only Newcastle upon Tyne chose to remain, but with the narrowest of margins (0.7 per cent).
In the aftermath, Mark Walton, managing director of Walton Robinson, seems to sum up a number of views in the North East business community that the current uncertainty had “raised fears among them”.
So what now needs to be done?
James Ramsbotham, chief executive of the Chamber, calls on Government for clarity.
“The [Chamber’s] response has been about encouraging UK Government to move quickly to clarify what the next steps are and when it’s going to take them.
“A lot of investment decisions were put on hold for the three months leading up to the referendum. Had the decision been to remain, I believe people would have started investing again, but there’s now greater uncertainty. People need to know what the leave vote actually means. How are things going to look, how long is it going to take and what’s going to change? We need to move towards a level of certainty as quickly as possible where people can make business decisions again.”
Sarah Glendinning, CBI North East regional director, calls for more action. “We need to know what Government’s priorities are. They need to be open and commit to leadership,” she says, adding, “things like the delay in making the decision regarding extending Heathrow airport doesn’t help. It’s critical to show the rest of the world that we’re open for trade.”
Graham Robb, regional chairman of the Institute of Directors North East, who voted to remain, adds to this point about showing positivity in the UK economy, while calling on North East business to act.
“We need to steady the economy and get some of the negativity off the airways because we’re in danger of talking ourselves into a recession,” he says.
“We can’t sit and grumble about our lot and then go to the rest of the world and tell them how wonderful we are.
“We need to have a narrative that talks to the world about the enterprise, innovation and opportunity that is presented by businesses in the North East to world markets.”
With the triggering of Article 50 – set to be the job of the new Prime Minister – there will be two years of negotiations for the UK’s exit from the EU.
One of the key areas will be arranging individual trade agreements with EU member states.
This is something that’s particularly important to the North East, as James Ramsbotham explains: “[The North East] is the only region with a positive balance of trade. Other regions need to emulate what we do. But at the moment it’s really hard because we don’t know what the trading relationships are going to be in two to three years’ time.
“As soon as the date of Article 50 is set, we need to start lobbying very quickly from the North East. We want as much access to European markets as possible – as quickly as possible.
“Seeing tariffs going onto things we’re selling into Europe would be really damaging. But it’s not just on manufacturing goods, it’s our services sector, our links with European universities and our transport links. Our airports and our seaports face Europe and links to ports such as Rotterdam are crucial, not just for exporting to Europe but to the rest of the world.”
But exit from the EU will enable the UK to negotiate trade deals in other global areas, something that Andy Saunders, the North East chairman for Business for Britain, has championed before and after the referendum.
“We should be going out now to America, Canada, Australia, New Zealand, India, Singapore, Malaysia and Korea and arranging trade deals. We can’t implement them until we leave [the EU] but they should be ready to go,” he says.
“We have to make it clear, we haven’t fallen out with our European neighbours – we just don’t want to be part of the EU any more. We still want to trade with the individual countries.”
Securing access to free markets between our European neighbours and around the world, however, may also mean accepting free movement of people – something that remains problematic for many Leave voters who seem to support more control over the UK’s borders.
On this point, James Wharton, MP for Stockton South, who supported Brexit, says: “I want to see the freedom to movement challenged and addressed but that doesn’t mean pulling up the drawbridge and saying no one’s allowed. It means ensuring that if people do come here they come here to contribute and to help our economy and to help our society, not just to take from it. That’s the framework on which I would like a deal to be done.”
Graham Robb adds: “We need to have immigration and migration based on economic need.”
Funding, too, has also been creating concerns in the region, with the North East having benefited substantially from EU funding.
For instance, to date, The North East Local Enterprise Partnership (LEP) area has had £89.5 million of its £437 million EU structural funding committed to projects for the 2014-2020 period. It also put forward a further £104.5 million worth of projects to Government for approval before the referendum.
Collectively, this funding would support more than 7400 businesses across Durham, Northumberland and Tyne and Wear.
The North East LEP has joined regional council leaders from the North East Combined Authority in seeking reassurances from Government that these levels of investment and funding in the region will be protected.
Chair of the North East LEP, Andrew Hodgson, comments: “EU funding has hugely benefited the North East over the last few decades and we are lobbying Government for clarity and seeking assurances that any potential future funding gap will be filled. We urge the Government to provide this guidance quickly to ensure opportunities to create jobs and growth are not lost.”
It is, of course, very difficult to predict at this stage what exactly will happen, how the UK’s position in the world will change and what the impact on North East business will be.
One thing is clear, though, the North East will have to continue to fight to be recognised for its talent and good work, even if its main audience shifts as a result of the UK leaving the EU.
*according to figures taken from estimates published by HM Treasury.