Member blog: Mitigating risk and maximising opportunities from Brexit
As 2020 has morphed into 2021, and with the cliff hanger of Brexit taking place amidst the ever worsening coronavirus pandemic, it takes a brave soul to look to the future with any sense of optimism.
Whilst I share the concerns of many about the long-term impact of Brexit, and the future of “levelling up” that remains at the heart of the current Government agenda, the recent work we have done with our public sector clients does give me heart that there are still good opportunities out there. We have been working with our clients to prepare for Brexit, devising solutions to mitigate risk and maximise opportunities – and, to this end, we have analysed the geographies and sectors that we believe will be hardest hit, to inform investment decisions and refocus strategy in a post-Brexit economy.
One example is inward investment – helping people to get across the message that the UK is open for business and making sure the broad strategy around skills and R&D is right, and providing what investors are looking for. Inevitably there will be a rebalancing with inward investment, with less from Europe. In the last year the vast amount has come from the USA, and part of the future challenge is going to be addressing the concerns of EU companies about the lack of free movement for their staff.
We now need a broad strategy around developing relationships with other countries, moving away from the excitement and importance of the initial investment, and concentrating more on mutually beneficial long-term relationships. To achieve this, regions need to build on their historic connections – accepting that investors see beyond the obvious benefit of the free market to the availability of talent, HEI infrastructure, tax incentives for R&D, training and education. To this end we need a broad strategy for different regions, towns and cities, to ensure the ‘entire’ offer is there, with each area playing its part. At the same time we need to consider investors needs in the round, beyond the obvious land or financial incentives.
Such an approach will not take away the immense challenges that Brexit is going to bring to inward investment, but will help to potentially mitigate these challenges. Our evaluation work highlights further key aspects with reshaping business support – particularly around business confidence and incentives to release the “cash hoarding” that can be traced back to the Brexit referendum, and put this to productive use.
Sector policy is important too. Our work in logistics in the food and drink sector, widely expected to suffer through cost increases also gives rise to optimism, as we found this sector is experiencing really rapid growth directly attributable to the pandemic, in some cases as much as five years’ growth in six months. Ironically as Brexit brought challenges, Covid provides opportunities, not least of which is logistics onshoring to create new supply chains. The sector is now looking at initiatives to boost recruitment, training, digitisation automation to boost productivity and reduce costs, alongside Freeport proposals. Other key sectors are also proactively adjusting to the new market conditions.
Finally, I do believe we will see a further push for devolution since different regions will have different needs and the need for individual policy responses. Beyond countries themselves I see this as being increasingly important to big cities, as engines for their surrounding areas, and a continuation of the politically important towns agenda.
All of these are at early stages, and it will be very interesting to see how they develop – but the emerging message is clear. Change brings opportunities as well as challenges, and for those ready to think differently, build on their strengths and adapt to changing market circumstances, the future could yet be a very bright place.
Heather Frecklington is Partner at Focus Consultants, leading the Funding, Research and Economic Development team, and a member of the Institute of Economic Development