IN ENGLAND, ECONOMIC EXPANSION SLOWS
ably stronger economy as the impetus.
But some economists fear such a move is premature given Britain’s fragile state. Many focused on plunging retail and car sales as a harbinger of trouble.
The drop in the pound has lifted prices on goods ranging from Italian olive oil to Chinese-made electronics. The rate of inflation reached 3 percent in September, the fastest pace in five years. Consumer spending has dipped during the past year while consumer credit is rising — a combination that often ends badly.
The Brexit referendum prompted negotiations through which Britain and a jilted Europe are supposed to hash out their future dealings. But the talks have proved acrimonious and largely futile. This has heightened concerns that a two-year deadline on negotiations could pass without a deal, subjecting companies that trade across the English Channel with unsettling ambiguities about future rules. The Bank of England has been warning banks to prepare for that very eventuality as one possible outcome.
With the boundaries of commerce unclear, some companies are reassessing the appeal of centering operations in Britain, the former seat of a global empire that increasingly looks like an island nation.
“Clearly, growth has slowed quite sharply over the last several months,” said Peter Dixon, a global financial economist at Commerzbank AG in London. “There is a sense that companies have been postponing investment.”
Britain now stands as one of the world’s weakest major economies, even as Europe, Asia and North America enjoy relatively robust growth. During the first nine months of the year, the British economy expanded at an annualized rate of only 1.3 percent.
Absent a deal, global banks are confronting the prospect that they could no longer use their London office to serve customers across the Continent. Many have been scouting spaces in financial centers that are firmly within EU territory.
Citigroup has outlined plans to set up a trading operation in Frankfurt, while applying for a backup license in France. Goldman Sachs recently leased expanded office space in Frankfurt.
In the West Midlands, an industrial reach of England that includes Birmingham, foreign direct investment dipped slightly in the year after the Brexit vote, according a recent assessment from the Greater Birmingham Chambers of Commerce.
The chamber pinned the blame on “uncertainty caused by the outcome of the EU referendum,” which was “delaying investment decisions, a trend echoed in other areas of the U.K.”
Chamber representatives have been turning their attention beyond the EU in pursuit of fresh investment. A delegation recently returned from Turkey. In planning future visits, the chamber is especially focused on cultivating business with members of the British Commonwealth.
“It’s a rewinding of history, overtly looking for trade with Commonwealth countries, rather than with Europe,” said John Lamb, a chamber spokesman. “We really are starting to look at markets in the post-brexit world.”
Time itself has become a threat. As negotiations yield headlines about sniping within Britain’s governing Conservative party, each week that passes absent clarity amplifies pressure on companies to shift people and operations to Europe.
“We can’t see how investment particularly, but also consumption, will not be affected,” said Kjersti Haugland, chief economist at DNB Markets, an investment bank in Norway. “How can you go ahead with big investments when you don’t know what framework will result?”
For Nim’s Fruit Crisps, the variables of Brexit have advanced British self-sufficiency.
Previously reliant on a supplier in Belgium for most of its fruits and vegetables, the company has in recent months found domestic suppliers for every needed variety except pineapple, limiting its exposure to the vagaries of exchange rates. Today, Nim’s buys apples, parsnips, cucumbers and a range of other crops from British farmers.
The fall in the pound has also made Nim’s products cheaper outside Britain, bolstering its exports, which now make up more than half of total sales. Nim’s snacks are sold in Germany, France, Italy, India, Israel and — soon — Saudi Arabia.
“What I’ve learned is that Europe isn’t the only market for us,” said Raja, whose Nim’s business card identifies her as TheBoss.
Yet as she seeks to complete a deal putting her crisps on the shelves of a major British supermarket chain, Raja worries that the needed volumes will exceed the capacities of Britain.
“I suddenly have to find 100 tons of apples,” she said.
She is scoping out farms in Poland, even as she worries about the value of British money in a world shaped by Brexit.
“I have to keep my margins tight,” she said.