MANCHESTER -- Brexit was clearly on everyone’s mind at the ACT Annual Conference, as evidenced by the concerns of attendees, as well as keynote speakers.
During an onsite poll taken Wednesday morning, attendees were asked what they believe will have the greatest impact on their treasury departments going forward. Brexit easily topped the list at 47 percent, ahead of the interest rate environment (20 percent), funding decisions (19 percent), and cybersecurity (14 percent).
The clock is ticking
UK treasurers' concerns are not unfounded. Cross-border trade with the EU is essential for many UK businesses. But as Paul Watters, head of corporate research for S&P Global Ratings noted, a trade agreement needs to be worked out with the EU by March 2019. If it isn’t, “huge legal and economic uncertainty would result,” he said. Negotiations haven’t even started, and many believe that no deal will be reached in time.
Working out a deal might be more complicated that many realize. Monique Ebell, associate research director for the National Institute of Economic and Social Research (NIESR), provided the view of the UK from Estonia. Estonia views the UK as small, and after Brexit happens, it will lose a percentage point of GDP at most. That’s not what bothers Estonians about Brexit—it’s security. Nations like Estonia have to deal with Russian aggression, and Ebell expects factors like that to be part of the negotiations of the UK/EU trade deal.
Whatever happens, a top priority for UK corporates should be minimizing the friction of cross-border trade, Watters stressed. The UK must also accept that it will lose its ability to have any influence over the direction of EU trade. However, he also believes the UK has an opportunity to become leading advocate of free trade globally.
Providing the political perspective on Brexit was Tuesday opening speaker Lord Michael Dobbs, former parliamentarian and the creator of “House of Cards”. He addressed the speculation that the UK could reverse its stance on leaving the EU by saying that he has not seen “a shred of objective evidence that Britain wants to change its mind.” He said he remains an optimist about the post-Brexit EU, while remaining a realist. He believes in the possibility of “uncertainty leading to future opportunity”—which is essentially what “House of Cards” is all about.
This view contrasts considerably with that of Tuesday closing speaker Andrew Garner, CEO of Garner Associates. He condemned Brexit, saying that there should never have been a referendum in the first place. “The calling of a referendum has been one of the worst decisions we’ve ever had,” he said.
From Garner’s point of view, the Brexit referendum was a sign of weak political leadership. He stressed that there are certain instances in which leadership has to say, “This is my decision; I’m doing it,” rather than, “You decide.” Post-referendum, he drew the conclusion that “there is a complete vacuum of political leadership” in the UK.