Brexit is ‘the biggest act of economic self-harm’
ONE of Britain’s most high profile corporate chiefs has described Brexit as “the biggest act of economic self-harm” in Britain’s history.
Sir Michael Rake, who recently stepped down after 10 years as chairman of BT, added that Britain has lost influence on the world stage and London would no longer be the leading player in global finance.
Sir Michael, who has previously held positions as president of the CBI, business adviser to David Cameron during the coalition government and chairman of both KPMG and easyJet, was in Cardiff to address Cardiff Business Club.
Speaking before the meeting, Sir Michael said Britain was in a “very difficult and dangerous situation” as it edged towards Brexit.
And he dismissed suggestions that the setting of a date for withdrawal had provided clarity.
He said: “There is no certainty. We’ve made no progress with the negotiations to date and we’re running into difficulties.
“Regardless of what the Brexit supporters say, it has been proved that they were either mistaken or that they deliberately misrepresented the facts around trade treaties.”
Sir Michael said that the continued uncertainty was already having an impact on business.
“For the first quarter in 20 years, we have had net disinvestment in the UK [in Q3] and the CBI has found that 60% of businesses are currently holding back on investment.
“Apart from opportunistic acquisitions due to the fall in sterling, plans are being held up and everyone is looking to see what will happen – contingency plans have not only been put in place, they are already being executed,” he said.
Warning that it would take “at least five to 10 years” to negotiate new trade agreements and complete the transition to full withdrawal, he added: “Brexit is the biggest act of economic self-harm in our history; people had the political choice and as the Electoral Reform Society said, there was no guardian of the facts – the £350m figure for instance was shown to be false yet it continued to be used despite being a mendacious statement.
“Brexit was the first plebiscite in history that had irreversible constitutional change at its heart and was allowed to be [carried] by a minority of the electorate.”
Two weeks ago, the Bank of England declared that as many as 70,000 jobs would be lost from the finance and banking sector as a direct consequence of the UK leaving the EU. Although some commentators dispute the figures and have suggested they represent a worst-case scenario, Sir Michael backed the Governor.
“Mark Carney was completely right. We have probably already lost 30,000 jobs from the sector and we could easily see another 30,000 to 40,000 jobs lost – the Stock Exchange suggest this figure could rise to 100,000.
“But the losses are right across the UK and some will be gone due to changes in technology. Carney is the voice of stability and forward thinking,” he said.
He added: “London will remain a leading player, it just won’t be THE leading player and whether people like it or not, the UK has lost a significant amount of its influence on the world stage.
“We seem to have a completely dysfunctional government that is at civil war with itself, and we have an opposition that wants a return to the days of nationalism and high taxes. This is a position that is heavily supported by a younger generation increasingly angered at the older generation for leading them to where we find ourselves today.”
During his 10 years at the helm of BT, the telecoms giant has undergone perhaps the greatest and most significant change in its 180-year history. Sir Michael described how it weathered the crisis of the late 2000s and went to roll out superfast broadband and move into sports sponsorship and broadcasting.
“Ten years ago, BT faced a number of challenges – the onset of the global financial crisis being the most obvious. This was compounded by problems that existed within our global services business, which resulted in significant losses, a reduction of divided by 75% and a collapse in our share price.
“We needed to get costs under control and we did this through cost reduction, increased efficiencies and stabilising our global services business,” he said.
“Fast forward a few years to 2009, we successfully rolled out fibre optic broadband when no-one else was doing it and within a matter of a few years we transformed it from being a luxury to a necessity to a utility.”
BT was a sponsor of the 2012 Olympics and launched BT Sport a year later. Since then, Sir Michael said, “[we] have successfully defended our position and created competition in the market place for the first time – Sky had previously enjoyed 95% domination of that market space.
“And as our share price strengthened and bottom line improved, we acquired EE. We’re now stronger than we were, with a healthier balance sheet, too.”
Sir Michael is not about to leave the corporate world any time soon. He retains his roles as chairman of Worldpay Group and the International Chamber of Commerce, and in June was appointed chairman of Great Ormond Street Hospital.
Asked what lesson he would pass on to other business leaders from his long and varied career, he said: “Everyone should determine what they want to get out of life. If you are ambitious, then you need to learn to be resilient, to be thick-skinned and most important is that you have to learn how to deal with people and organisational culture, because people trump structures.”