Britain in business with Brexit bounce
BRITAIN enjoyed a Brexit bounce yesterday as companies announced thousands of new jobs, markets rose and official figures showed economic growth accelerated in the run-up to the referendum.
The economy grew by 0.6 per cent in the three months to the end of June despite stark warnings from the Government about the risks of leaving the EU.
Philip Hammond, the Chancellor, said the figures showed the country would start its Brexit negotiations from a “position of economic strength” as he promised to take “whatever action is necessary” to maintain business and consumer confidence. The growth figures mark the 14th straight quarter of expansion for the UK, extending the longest continuous period of growth of any major advanced economy.
The stronger-than-expected bounce in growth boosted share prices, almost erasing all of the losses incurred by the domestically focused FTSE 250 index after the June 23 referendum. The benchmark FTSE 100 closed at its highest level in almost a year.
Taylor Wimpey, one of the UK’s biggest housebuilders, said the uncertainty over the EU had not affected demand for homes in the first six months of 2016, or directly after the vote, despite warnings that buyers would put decisions on hold.
The Centre for Economics and Business Research believes house prices will continue to rise, even though growth will not be as quick as expected for the rest of 2016 and into 2017.
Several companies made an- nouncements showing their confidence in the UK yesterday, including McDonald’s, which is accelerating expansion plans with an extra 5,000 jobs by the end of next year. Paul Pomroy, the company’s UK chief executive, said that the fast food chain wanted to “reassure people that we’re here to create jobs and invest in them”.
GlaxoSmithKline, the pharmaceuticals giant, said it would invest £275 million to expand three UK manufacturing sites.
Sir Andrew Witty, chief executive of GSK, said the UK’s competitive tax system meant it remained “an attractive location for investment”, despite the Brexit vote.
Greg Clark, the Business Secretary, said the move was a “clear vote of confidence in Britain”. He said: “There really is no place better in Europe to grow a business.”
The Government also approved a £344 million plan to expand London’s City Airport.
14 Consecutive quarters of growth in the economy after it rose 0.6pc in the three months to the end of June
The latest quarterly GDP figures, showing stronger growth than expected, are the latest to belie predictions of a post-referendum meltdown. Certainly, the worst predictions of the Remain campaign in last month’s referendum have not materialised; but these statistics are inevitably backward-looking and tell us little about what is to come. Nor, for that matter, do surveys of business leaders showing confidence to have waned since June 23.
Far more indicative of what is happening in the real economy are decisions actually being made by multi-national companies to continue investing in the UK. The recent purchase by Japanese telecoms group Soft-Bank of the British technology company ARM has now been followed by a £275 million injection by pharmaceutical giants GSK at three of its UK factories. Managers who had been sceptical about the impact of Brexit now say Britain remains an attractive place to invest because of its skilled workforce and good tax conditions.
Just five weeks after the vote to leave, these are welcome developments; but it would not take much to undermine confidence, especially if there were to be an acrimonious break with Europe. The people charged with conducting the negotiations will carry a huge responsibility to ensure this does not happen. Theresa May continued her diplomatic drive yesterday with a visit to Italy. But day-to-day negotiations must also be conducted in good faith and with mutual trust. Personalities will matter; and we now know who they will be.
David Davis, the minister charged with devising a Brexit plan, and with a reputation as an abrasive character, will be pitched against Michel Barnier, a French Gaullist politician who is the personal choice of Jean-Claude Juncker, the Commission president. As internal market commissioner, Mr Barnier tried to impose new regulations on the City of London. He is a noted integrationist and will not have Britain’s interests at heart.
However, he has not been appointed to defend our interests but rather the EU’s. He will seek to strike a hard bargain that does not encourage other EU countries to think they can get a good deal by leaving. On the other hand, the country that will need most persuading that Britain is not getting an easy ride is France; so on the “Nixon to China” principle, perhaps Mr Barnier is just the man we must do business with in order to ensure that the final agreement is watertight.