At her Lancaster House speech this month, Theresa May was good to her word. She set out her 12-point negotiating position for leaving the EU and it was explicit that Brexit does, in fact, mean Brexit. The lady is clearly not for turning.
And if the Lancaster House speech was about withdrawing from the current order, the Prime Minister’s launch of her industrial strategy last week gave us a glimpse of the new order.
In the business world, our response should be one of pragmatism. Whether a Remainer or Leaver, business leaders are telling me that they just want to roll up their sleeves and get on with pursuing growth, especially now that they have a degree of certainty on what the starting point will be for the UK government.
But what about the long-term vision for the UK economy?
Brexit is only one – although admittedly huge – variable. The landscape is shifting and business leaders as well as policy-makers need to think about the rise of emerging markets like India, the impact of industry 4.0, new business models, the so-called gig economy and the new skills needed for businesses and people to reach their potential.
It’s my firm belief that we should use all these factors as an opportunity to shape a “new economy” – a sustainable and balanced economy which (to borrow a phrase) “works for everyone”.
Today, we launch a report into what this should look like post-Brexit. There are three pieces to the puzzle that the government needs to fit together.
First, policy-makers must make a concerted effort to support the UK’s fast-growth, entrepreneurially-spirited mid-sized businesses. Last year these businesses scored a hat-trick of fastest growth in revenue, profits and jobs, outperforming their larger and smaller counterparts. Yet they risk being overlooked as the UK prepares to leave the EU.
The CBI has said that such firms made the difference between recession and recovery following the 2008 crash, and these businesses (which we at BDO call “the economic engine”) are vital to helping the UK ride out any shockwaves caused by Brexit negotiations.
A common complaint I hear from the economic engine is around the growing complexity of the tax code. With the Brexit negotiations about to begin, short-term subsidies and tax breaks will be difficult to enact, especially if they contravene EU state aid rules. This gives the government the opportunity to make a virtue out of a necessity and, where possible, choose simplicity over subsidy to support the economy. Simplicity in doing business will give the UK a competitive advantage that does not breach EU rules.
The second piece of the puzzle is to create sector as well as regional powerhouses. George Osborne’s powerhouse agenda was well-received by the business community and it should not be forgotten. But as well as the mammoth three Hs of Heathrow, Hinkley Point and HS2, we want the government to look at smaller “shovel-ready” projects which can have an immediate impact on local areas. Sector powerhouses must also be a focus, with more funding put aside to help increase manufacturers’ understanding of industry 4.0 as well as reforming business rates for the high street.
And the final piece of the jigsaw is to ensure, despite Brexit, Britain remains an outward-looking economy with access to international markets and global talent. There are two levels of support required from the government. One centres on giving the practical detail as soon as possible of what new bureaucracy will be required to continue trading with the EU to avoid any interruption of supplies. And the other longer-term ambition is to secure additional trade deals and improve business access to the skilled people they need.
The UK has made a big decision to leave the EU and it’s clear that Brexit means Brexit. Earlier this month we got the short-term negotiating position. Now is the time to discuss the long-term vision.
For more information and to contribute ideas and opinions to BDO’s New Economy report go to www.neweconomy.bdo.co.uk