Chamber chief flags up fears over Brexit impact
Gap in profits for inward investors after sterling tumble, warns Patrick
FEARS over the ability of businesses to secure vital talent following the Brexit vote and inward investors’ reactions to profit shortfalls arising from sterling’s plunge since the referendum have been voiced by Glasgow Chamber of Commerce’s chief executive.
Stuart Patrick revealed he was concerned about how overseas companies, from the likes of the US, China and Japan as well as from Europe, might react to their UK profits being lower than expected in their home country’s currency because of sterling’s tumble since the June 23 vote.
He said he was becoming “more thoughtful about an economy like ours” that depended heavily on inward investment. He noted inward investors would have to “cover a gap” in terms of their UK profits because of the drop in sterling arising from the vote to leave the European Union.
Mr Patrick added: “That has implications for the long-term sustainability [of inward investment projects]. There is concern about how they [inward investors] are meeting profit targets when your sterling value is down 15 per cent. We have not seen any quantification of that at this stage.
“It is clearly not just EU investment. It is Japanese and American and all the investment flows we have had for decades. How is that [sterling drop] affecting [this]?
“You could argue there are ups and downs in sterling. It is difficult to see, having seen that fairly dramatic reduction in sterling value, what is going to change that over the next few years as Brexit is resolved. We do worry about that.”
Citing the results of a recent report on the impact of Brexit produced by the chamber, Glasgow City Council, and the Glasgow Economic Leadership board, Mr Patrick said: “Businesses’ main worry was securing talent. So many businesses with EU nationals – [their] immediate question was, ‘What do we tell our EU national staff?’.
“It does feel, of all of the issues, the one that the business community was really keen to be settled was commitment around the status of EU nationals. Although there has been a lot of good words, that remains a concern.”
Mr Patrick noted, however, that sterling’s weakness would make the UK cheaper for potential inward investors, while also acknowledging the challenges arising from the Brexit vote in terms of attracting such companies.
He said: “On the face of it, it is quite a good time to invest in the UK. Clearly, there are opportunities that we will be trying to access. We will be having to do a lot more work on that than we felt we needed to in previous years.”
Mr Patrick emphasised Glasgow Chamber could not wait until the implications of Brexit became clearer before ramping up efforts to make international connections and formulating strategies.
He underlined “vigorous” moves by Glasgow Chamber to forge links with the business communities in northern Italy, Germany, the United Arab Emirates, Canada, and the US’s Eastern Seaboard, including New York.
Mr Patrick said Glasgow Chamber was getting its “mind around” China, noting this market was a longer-term goal for business links.
He added: “In the meantime, Brexit will carry on being Brexit. We will … have to have a debate over the issues, probably without having any more knowledge at the end of 2017 than we did when it started. I hope that is not the case but I fear it will be.”
Mr Patrick noted that, amid the uncertainties created by the Brexit vote and the potential impact on inward investors, it was more important than ever for Glasgow to have major companies with their headquarters in the city.
Noting potential for inward investors to make decisions based on the Brexit vote or continued oil and gas sector weakness, he said: “This is the time to have your own indigenous companies … The more Weirs and Aggrekos and Clydesdale Banks that are headquartered here, the better. I feel, in a postBrexit environment, that is ever more important.”
Mr Patrick acknowledged growth in Glasgow’s economy was likely to slow in line with the deceleration projected by economists in the UK as a whole next year amid Brexit-related uncertainty. However, he flagged the benefits of major investment projects, including the University of Glasgow’s redevelopment of its campus and investment, backed by City Deal funding, in Sauchiehall Street.
He also cited the potential to build innovation districts in Glasgow, citing investment by leisure entrepreneurs in Finnieston arising partly from the SSE Hydro venue’s impact. And he highlighted the fact that pioneering technology companies such as satellite producer Clyde Space were now located in this part of the city.
Mr Patrick also underlined Glasgow’s credentials in the global life sciences arena and the engineering sector, including optoelectronics.
He believes it is crucial for the city and its retail offering that Land Securities ultimately opts to go ahead with the planned Buchanan Galleries extension. This development was put on hold last year by Land Securities, which cited major work being undertaken nearby by Network Rail on the Glasgow to Edinburgh line.