Executives fear Brexit driving UK toward economic cliff-edge
More than a quarter of UK business leaders are now “very pessimistic” about the prospects of the UK economy, with fewer than 100 days to go until the UK completes its exit from the EU. Though the next two years bode poorly for the UK, British executives are increasingly fearful of a global financial crisis, and believe China and the US, not Brexit, will be the most likely sources of such a collapse.
One year ago, Eden McCallum’s survey found that pessimism about the United Kingdom’s future had already spread through British business, as Brexit negotiations finally moved into their second phase in 2018. However, with the 2019 deadline for an agreement now less than 100 days away, the latest edition of the consulting firm’s study shows that fewer than two in every ten executives are optimistic about the UK’s economic outlook in the next two years.
At the same time, 27% of executives are now very pessimistic, while 55% are somewhat pessimistic. Only 1% of the 192 UK respondents of Eden McCallum’s survey said they were very optimistic. While this does not represent any particular shift from the figures of 2017, a higher portion are now extremely pessimistic.
Interestingly, while UK businesses have long been bracing for a period of economic turbulence, the pessimism among the corporate community has further spread to negatively regard the prospects of the continent. In 2017, a minority of respondents said that they were pessimistic about the Eurozone’s economic outlook in the next two years. Now, a slim majority of 51% are either somewhat or very pessimistic about prospects of countries in the region. In global terms, meanwhile, more respondents remain upbeat than not, though pessimism in the sample saw a drastic rise of 14%.
Comments from respondents were not universally negative, with one stating, “For the UK, the disruption involved will be a huge spur to productivity. And it will be progressively more beneficial to extract the economy from the current protectionist environment of the EU, with its lack of innovation due to excessive application of the 'precautionary principle.'”
The majority were less enthusiastic, though. One claimed, “It's a lose-lose situation… cutting yourself off from your closest trading partner and having to rebuild all the admin and regulation currently shared across 28 countries is insane,” while another argued, “Immigration and foreign companies are drivers for UK success, not to mention the City. I see no evidence that Brexit will improve any of the above.”
Furthermore, the perception that an impending crisis is on the cards has risen significantly in the shadow of continued uncertainty, at home and overseas. 51% of UK businesses said that a Eurozone crisis in the next five years was at least somewhat likely, but now that figure stands at 71%. At the same time, a majority now expect that there is a real likelihood of a global financial crisis in the coming five years.
Oddly, the expectation of the UK to exit the EU has dropped in the past year, despite the advanced stage of the Brexit process. While the vast majority of British business leaders still concede it is likely that the UK will withdraw from the bloc, 10% now think it is somewhat unlikely, and 2% feel it is very unlikely. This comes on the back of a further fall last year, when the amount doubting Brexit would come to fruition grew by 4%.
This undoubtedly has resulted from the beleaguered nature of the UK Government, which does not presently command a sturdy Parliamentary majority. While a confidence and supply deal with Northern Ireland’s Democratic Unionist Party (DUP) has proven to be enough for Prime Minister Theresa May to cling to power, the DUP has repeatedly refused to support her proposed Brexit deal on the basis it could put a border in the Irish sea.
This means that for the time being, barring some impressive Parliamentary wrangling, it is unlikely a Brexit deal will be passed into law. Many pro-EU commentators have suggested this means a second referendum will come to pass, and Brexit may be cancelled – but Downing Street has repeatedly stated it does not favour this. The Cabinet has instead been briefed to plan for a No Deal Brexit, suggesting that those who now see the secession as unlikely may have jumped the gun.
While the inclination that there will be a global crisis seems to coincide with the culmination of Brexit, however, the timing is more coincidence than correlation. In actual fact, only 4% of the British executives surveyed expect that the UK would be the source of such a global collapse.
Arguably, a domino effect relating to Brexit means that the Eurozone is considered to be much more likely than the UK to be the source of a crash; however, fears of this nature are still dominated by the lingering conflict between the world’s two leading economies. With talk of trade war between Donald Trump’s America and Xi Jinping’s China continuing to escalate, 44% of businesses expect the Asian superpower to be the source of a future crisis, with a further 24% suggesting the same of the US.
