Regional economy remains robust after Brexit

Despite the uncertainties that business has faced since the vote to the leave the EU and the subsequent changes in the Government, the economy in the East Midlands has remained robust.

Domestic sales have held up and – despite a dip in the months immediately following the referendum – overseas orders have grown, particularly for manufacturers looking to benefit from favourable exchange rates and keen to be on the front foot for any opportunities arising from negotiations to leave the EU.

However, uncertainties remain for both immediate and long-term operating conditions, according to the results of East Midlands Chamber’s Q3 Quarterly economic Survey (QES) – the first real acid-test of the impact of the vote to leave the EU.

In the immediate future, the survey revealed, businesses have concerns over stability in exchange rates, interest and inflation and the difficulties these create for planning and investment.

While many were encouraged by the moves taken by the Bank of England over the summer to shore-up confidence, there were concerns that the levers held by the bank have now been pulled and there is little scope for further activity.

In the longer-term, there is still little clarity over what the main features of a successful UK economy outside of the EU will be.

Not only is there still a complete lack of time-scale, there has been very little communication from Government in areas such as the types of trade deals the UK will negotiate and what leaving the EU will mean for businesses that employ staff from EU countries or follow processes and regulations set or informed by EU directives.

Government Ministers have, to date, put this lack of information down to supporting their negotiating positions with EU counterparts. However, businesses said they felt that, while they may not be able to get all of the answers, more could be done to demonstrate a road map and direction of travel.

Chris Hobson, Director of Policy at East Midlands Chamber, said:-

“It must also be stressed that defining a vision for a successful UK economy outside of the EU is about much more than Brexit negotiations. There are also domestic policies and measures that can be introduced now to demonstrate the type of economy business wants to create.

“In the forthcoming Autumn Statement, the Chancellor has an opportunity to demonstrate a commitment to providing the right conditions at home for businesses to thrive.

“Business requires first class road and rail infrastructure to move goods and people. It needs reliable, fast broadband to operate and to promote activity across global markets. They need policy that will support firms that want to invest or grow overseas.

“Businesses want their employees to have housing at affordable prices close to their places of work. And they need policy that supports an environment conducive to day-to-day operations – this includes realistic regulations, fair and transparent business rates and, importantly, an education system that prepares and equips young people to succeed.

“The broad sectoral spread, presence of world-leading businesses, their supply chains and support infrastructure in terms of universities and other partners, makes the East Midlands the ideal location for the development of, and proving ground for, Government policy.

“Businesses in the East Midlands stand ready to support the shaping of that vision, the development of the right policy and its implementation on the ground.

“A snapshot survey carried out in the month immediately after the exit vote suggested that confidence in the region was still high. But the Q3 QES data proves that there is still considerable concern among businesses about Britain’s economy post-Brexit, with some firms putting investment in training and machinery on hold for the time being.

“There is also a continuation in the underlying trend of firms finding it difficult to recruit skilled staff. Half our members employ workers from the EU and have concerns about the status of those workers post-Brexit. This is something the Government should address without delay.

“Although the State of the Economy Index has shown a second successive drop, it is important to note from this quarter’s data that all the measures still indicate growth in the economy, albeit it at a slower rate than since Q3 2013 and reaffirm other reports published since the referendum that have said we should avoid the recession predicted by some before the vote.”