Two reports published yesterday paint radically different pictures of the future for post-Brexit Britain.
This quarter’s Deloitte CFO survey makes for troubling reading.
Concern over Brexit is at a record high, with 79 per cent of CFOs expecting a deterioration in the business environment, and just 12 per cent thinking now is a good time to take a risk. Brexit sentiment today is at its most pessimistic since the Referendum.
On the other side of the coin, investment in London is booming, particularly when it comes to real estate. The Cushman & Wakefield report into capital markets reveals that London is still the world’s most popular city for real estate investment, with overseas investment up 22 per cent from last year.
The key to reconciling these two visions – one of the UK on its way down, the other of its capital keeping its top place – rests on the possibility of Brexit deal.
The Deloitte survey reveals that it is not Brexit itself that is causing such low spirits, but the uncertainty surrounding negotiations, in particular with regards to a transition agreement. The introduction points out: “if the UK and the EU strike a deal, and agree a smooth transition, there could be scope for a relief rally in sentiment”.
It is anxiety about “crashing out” that is forcing CFOs to fixate on immediate-term risks, rather than looking at opportunities for the future – or at least a return to something like normality.
The real estate report expresses similar sentiment, with analysts confident that, once the sector has more certainty, international investment will increase further still.
It all comes down to the probability of hammering out a deal before the March deadline. The risks are high, but so is the motivation for progress on both sides.
Aside from some ideological hard Brexiteers within the Tory party, no one wants to see the UK leave without a deal, and the mood at the Conservative conference last week was one of pragmatism.
On the EU side, Angela Merkel told a Germany finance conference last month “we will use all our force and creativity to make sure a deal happens”, and while the Irish border remains a sticking point, Ireland’s deputy prime minister said on Sunday that an EU deal was “90 per cent” agreed.
Clearly, the possibility of a no-deal outcome has sharpened minds. And if smooth transition terms (if not the final deal itself) can indeed be agreed in time, that could give businesses a chance to breathe out, take stock, and consider future spending decisions with renewed confidence and a little more clarity.