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Brexit... or should that Brenaissance?

 

Posted on 5 September 2016

There’s a competition running in the financial weekly, Money Week, to rename “Brexit “ as something more positive.  Favourite suggestions include Brenaissance,  Brevival,  Brenewal, Breedom and Britonomy.

Perhaps   frivolous,  and  reflective of the editor and writers being strongly in favour of Brexit (for a variety of reasons)?  Well maybe, but its recent consideration of the early financial impacts does make interesting (and uplifting) reading.

Consider Sterling; it was supposed to dive-bomb. Hardly – it fell, from an arguably overvalued level anyway, by around 10% against the dollar, then fairly quickly stabilised. Good for exports too.

And interest rates? They were meant to spiral up out of control as a result of Sterling plummeting but in fact they’ve fallen (albeit that the jury’s out over whether this is a good thing).

Employment?  Well, the 9,500 predicted rise in unemployment in July resulting from predicted Brexit-induced uncertainty wasn’t quite right either; in fact unemployment fell by 8,600.

And as for house prices, they’re looking flat save for London and the South East which were seriously overpriced anyway. Unsurprising given the halving  of  base rates.

Ah, but what about the stock market.? Pretty good actually - the Footsie 100 hardly twitched and the more UK-centric 250 ( which did fall) is now  6% above its pre-Brexit high for 2016.

So, thus far  it’s looking OK, but caution is wise - we are, after all, at a very early stage and of course the Brexit process hasn’t even been invoked yet.evertheless, I think we could all do without the endless tirade of media negativity. After all, sentiment and confidence are crucial to business and the M&A market, and there’s some truth in the adage “you get what you expect”.

There are certainly some winners from the vote; we do a lot of deals in the hospitality sector  -  itself partly affected  by tourism, which is growing at an unprecedented rate since the vote and the resulting  correction in Sterling.

And this isn’t an insignificant sector; surprisingly it is the third largest sector in the generation overseas income (after financial services and chemicals). The UK is 8th   in terms of visitor numbers with 36m visitors spending £23bn in 2015, and the tourism/hospitality industry is the 3rd largest employer  in the UK, employing over 3m people across 250,000 businesses.

Futhermore, this year, the boost to the economy from Britons “staycationing “ is estimated at £2.4bn.

Certainly, the hospitality sector looks strong and we anticipate continuing brisk dealflow  in this sector  at very strong prices - at least for the foreseeable future, and assuming the impact of National Living Wage continues  to be absorbed.

I prefer to look on the bright side, admittedly, but surely the “Brenaissance” ethos  isn’t such a bad  idea?

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