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Blame it on the EU

Between now and the 23rd of June it’s safe to assume that any bit of economic downfall will undoubtedly be connected with the EU referendum.

We’ll be honest, in the Pomegranate Consulting offices we’re still unsure of what a vote for Brexit actually means for the UK. With a lack of clear direction, we wanted to take a look at the blame the EU referendum has been receiving to check whether it’s justified.

Manufacturing industry suffers worst month in three years… blame it on the EU

A recent report carried out by financial data provider Markit, showed a dramatic decline in British factories due to falling export orders and a lack of consumer demand. The report also proceeded to point the finger of blame at; “rising uncertainty about the global economy, the oil and gas industry, retail sector and the EU referendum”. They forgot to also blame it on the boogie, moonlit sky, and the dreams that died.

This is the lowest point of a year long slide that has resulted in over 20,000 job losses in the past three months. It’s not just this side of the Atlantic that is feeling the squeeze, manufacturing in the US has also declined in recent months. They must also be worried about the EU…

Buyer confidence takes a hit

A recent report by market research company GfK, described its consumer sentiment index as the lowest it’s been for 15 months. The index dropped to -3 in April down from 0 in March. GfK claimed that the drop is due to a lack of consumer confidence in the EU.

Or is it?

The areas measured in the index relate to;

• Personal financial situation over the last 12 months
• Personal financial situation over the next 12 months
• General economic situation over the last 12 months
• General economic situation over the next 12 months
• Major purchases

The index shows a drop of 20 points in 12 months for the general economic situation. A massive drop, although it fails to make note of the personal financial figures which have actually improved over the last 12 months.

Interestingly, major purchase confidence is fairly similar to 12 months ago, dropping only one point, although it had previously doubled in February and March this year. Could the drop in points for the general economic situation be down to uncertainly, a lack of clear facts or scaremongering?

A recent survey of CFO’s, conducted by Deloitte, indicated a majority were holding off hiring staff and were reluctant to spend on new equipment before the vote. Despite this fear and trepidation, only 26% of CFO’s surveyed had contingency plans in place of a Brexit vote. Surprisingly 53% of those surveyed had no current or future plans in place should we leave the EU.

So as it stands, a lot of CFO’s are nervous about the vote but, aren’t making preparations. This is either due to an over confidence that we will remain in the EU, or simply because they are unsure of the contingencies to make.

Big business backs leave campaign

In March, ex-HSBC boss Michael Geoghegan, joined a list of 250 business leaders backing the leave vote including David Ross, co-founder of Carphone Warehouse – now Dixons Carphone, John Caudwell, the founder of Phones4U, economist Roger Bootle and Tim Martin, founder and chairman of Wetherspoons.

The group commissioned a survey to 1,000 small and medium sized businesses which found that 31% believe EU membership makes it harder to employ staff, while only 14% think it will be easier. A third of businesses polled stated that the EU hinders business.

Vote leave is chaired by the former director general of the British Chamber of Commerce, John Longworth, who resigned following pro-Brexit comments.

Speaking of the poll, Longworth said:

“If we vote leave, liberated from the shackles of EU membership, jobs will be safer, Britain will be able to spend our money on our priorities and we can look forward to faster growth and greater prosperity in the future.“

Sounds perfect doesn’t it. More money to spend, faster growth, safer jobs, who wouldn’t want to leave. Meanwhile Chancellor George Osborne, who is backing the UK staying in the EU, said:

“Under any alternative, we’d trade less, do less business and receive less investment, and the price would be paid by British families… Wages would be lower and prices would be higher.

“The most likely result is that Britain would be poorer by £4,300 per household. That is £4,300 worse off every year, a bill paid year after year by the working people of Britain.“

But wait a minute, didn’t John Longworth just tell us that we would have more money with faster growth? Surely neither of these two gentleman would make such spurious quotes without knowing the facts first.

These aren’t throw away comments by columnists and BBC presenters, these are quotes by respective heads of campaigns. The people in the know, who are charged with helping us make a crucial decision that will affect our future generations.

What happens next?

What we do know is that the process isn’t quick. If a leave vote is successful on June 23rd the UK would still abide by EU treaties and laws for a minimum of two years as it negotiates a withdrawal agreement and relationship terms with the remaining 27 nations. Depending on negotiations it could take longer than two years, and the UK would be unable to take part in any EU decision making.

Alternatively, if the UK vote to stay in the EU, Cameron has promised changes to the current regime with the UK having more control over our own affairs, incorporated in an EU treaty change. Cameron also confirmed that the UK would keep the pound and any money that is spent bailing out Eurozone nations will be reimbursed.

The moral of the story

Don’t believe everything you read and take ‘absolutes’ with an absolute pinch of salt. Those that promise outcomes without the facts are usually the ones left red faced. In this instance, both sides of the argument are happy to blame the EU to prove their point.

Whether it’s the stagnant manufacturing industry or the struggle for SMEs to employ staff, the EU is taking the brunt of the blame. For many the 23rd June can’t come quick enough, as the uncertainty is currently having a worse effect on the economy than the outcome.

This was posted in Bdaily's Members' News section by Kyle Daniels .