UK Firms Increasingly Uneasy on Brexit Outcome

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The Scenario

Put into the same room the chairs of TalkTalk Telecom (LSE: TALK.L – news), Barclays (LSE: BARC.L – news), Nationwide Building Society (LSE: NBS.L – news), HSBC UK, Amazon UK, Vodafone, BT, Rolls-Royce, Lloyds Banking Group, Merlin Entertainments (Frankfurt: A1W713 – news), Siemens UK & Ireland, Unipart, the John Lewis Partnership, EY, KPMG, the CBI, Facebook UK & Ireland and the Institute of Directors and a number of influential technology entrepreneurs.

The Result

The result is the annual CEO Summit hosted by The Times which has become one of the most high-powered meetings of executives this side of Davos – since it was launched in 2010 just weeks after the creation of Britain’s first bloc government since the war.

Such occurrence, as well as making a significant contribution to the national debate on the economy, are usually an excellent opportunity to take the pulse of corporate Britain and this year was no different.

The subject of this year’s event was making sense of the intriguing events that have staggered the global political landscape during the last 12 months, counting the election of Donald Trump, the rise of Emmanuel Macron and the surprising election of a hung parliament then Theresa May’s decision to call a snap election.

The mood, it is fair to say, was one of skepticism. A poll that asked delegates how confident they were about the UK economy was topped with a 46% vote of “not very confident.” “Neutral” was next, at 24%, followed by “reasonably confident” on 20% and “not confident at all” on 10%.

Not one delegate decided for “very confident.” A similar poll found a majority of executives do not expect there to be a recession during the next 12 months – though a sizeable minority feared there would be.

The tone was set almost from the outset with a speech by Enda Kenny, who has just stepped down after just over six years as Ireland’s Taoiseach, during which he had an austere message for Theresa May as she settles for Brexit negotiations.

He said: “Generally, you have got a better chance of getting some of what you want if you know what you want.

“And it is much the same with ‘Brexit means Brexit’ – as if, by declaration or by empathy, we are all supposed to know what Brexit means and that we know precisely and intimately, even innately.

“The fact is we do not. We have little idea and, as politicians, we have to have to honesty and humility to say that.”

The other keynote speaker, David Davis, the Secretary of State for Exiting the EU, was heard with politeness. His talk was delivered with characteristic bounce and vigor although it is not clear whether, during the following question and answer session, he meant to say that his Cabinet associate, the Chancellor Philip Hammond, had “said many things that aren’t consistent with each other.”

Mr. Davis at one point went “off-piste” to differ from his speech and implore up memories of a figure still adored by many in the business community – Margaret Thatcher.

He recalled that the mood in the nation presently felt implicative of the mood just before Mrs. Thatcher’s election in 1979 and said that what was wanted was a “revolution of expectations” comparable to the one brought about by Britain’s longest-serving post-war Prime Minister. He said that, after her elections, abruptly “people said ‘we can do this,’ it was not just about managing decline.”

However, talking with delegates afterward, it is fair to say that few were impressed by Mr. Davis’s sunny optimism.

One senior executive went so far as to compare, in detrimental aspect, Mrs. May and Mr. Hammond with her German counterparts Angela Merkel and Wolfgang Schauble.

In Germany, he went on, the focus of government is all about providing the economy for what business people call ‘Industry 4.0’ or the ‘Fourth Industrial Revolution.’ In this country, he complained, all ministerial “bandwidth is going to be taken up with Brexit.”

What was unusually shocking about this response is that business people are, by definition, upbeat and positive people. They are glass half-full folk, by and large.

That is not to say there was not a certainty to be found. There was – particularly among those business leaders whose enterprises are involved with technology.

There were also plenty of sensible prescriptions on offer from business leaders on how to boost Britain’s lackluster productivity record, on increasing the robustness of the financial services sector ahead of an expected return to a more normal interest rate environment and on how businesses should react to the changing tastes and desires of millennials.

There was also confidence that business can remodel itself to meet the current mood of populism in the developed world and plenty of informed discussion about how most CEOs see the plc model regarding its sense of public purpose and not just, as in the early 2000s, regarding shareholder value.

UK firms are growing increasingly uneasy about the outcome of the Brexit negotiation.

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