The government has spent the last 6 months communicating the message that London (and the UK) is open for business. All the while unofficial negotiations have been taking place with the EU and Member States, despite the EU’s mantra of “no negotiation until notification”. Unsurprisingly, these political developments have had significant economic implications.
The pound fell dramatically after the Brexit vote last year, and since then has been trading around 15% lower compared to the dollar and 12% lower compared to the euro than it was before the referendum. The fall in sterling has increased import costs for manufacturers which is a key factor for sectors such as the car industry, and it has made foreign holidays more expensive for British tourists.
However, it is not all doom and gloom, as the weak pound has helped exporters because British made goods are considerably cheaper in our key export markets of Europe and the US. It has also made the UK much more attractive for foreign tourists as hotels, meals and events are all considerably cheaper given the newfound relative strength of their foreign currency. This has had a positive impact on the conference and events sector as a whole, by attracting more business and leisure tourists, as well as improving cash flow; with international events bookers eager to settle their bills while rates are favourable.
Record low UK interest rates have also contributed to the weaker pound. Currency strategists say that sterling is likely to remain volatile in the coming months until there is greater clarity about the UK's Brexit deal. Overall there has undoubtedly been some turbulence for the economy, as one would expect given the unchartered territory the country now sails in, but the warnings of an immediate catastrophe following a vote to leave the European Union have yet to be proved right. In no small part due to the weak pound, latest figures show the economy grew by 0.6% between July and September 2016, faster than previous estimates.
The Office for Budget Responsibility (OBR) now forecasts growth of two per cent in 2017, which Chancellor Philip Hammond announced in his Spring Budget statement. According to PwC research released in February 2017, Britain is likely to grow faster than any other major advanced economy over the next three decades as the EU’s share of global output diminishes. The Office of National Statistics’ recent employment figures also show that employment climbed by 37,000 to 31.84m in the three months to December 2016, while unemployment stayed steady at 1.6m - a level which has fallen by almost 100,000 over the past year as a whole.
While the immediate economic impacts of Brexit are contrasting, what is consistent is the message from Central Government as well as London Mayor, Sadiq Khan, that London is open for business.
Lord (Mervyn) King, former Governor of the Bank of England, said that “The future of the London is secure because of its role in the world as a whole. The challenges we face are nothing to do with Brexit and that Brexit in the long run in any event is not likely to make an enormous difference.”
