BUSINESS LEADERS WANT AN END TO BREXIT HOLDING PATTERN

by Geoff Lawrence, GM Vistage International UK

As the political fallout from Brexit rumbles on, Vistage’s latest confidence survey of UK SME leaders reveals that confidence is at its lowest point since its measurement began. At 97.9, this quarter’s confidence score is more than 5.6 points lower than the previous quarter, according to the Vistage CEO Confidence Index.

Prime Minister Theresa May said in her New Year message: “The New Year is a time to look ahead and in 2019 the UK will start a new chapter.” Two months into the year, and less than 50 days from the current deadline for Britain’s exit from the EU, the contents of that chapter are still to be confirmed.

There can be no doubt that the next few months will be significant for the UK economic landscape.

CEOs and business leaders across the country are telling us that the ongoing political uncertainty in Westminster, and the lack of any clear pathway, is casting a shadow over the outlook for the year ahead.

As the government’s malaise has deepened, confidence in the overall health of the business economy has also waned. The extent to which these two issues are intertwined is laid bare in the pattern of results we have tracked over the past year.

From the highs of March 2018, when Britain announced it had agreed terms with the EU over Brexit, a gradual weakening in confidence in the pursuant quarters reached its nadir in our most recent member survey, as UK SME confidence fell to its lowest levels since we first began to run the Confidence Index.

Many of the business leaders in our group of respondents will have voted to remain in the EU. Many others will have voted to leave. The evaporation in confidence we are seeing within the business community cannot be divided across these lines however. Regardless of where their political affiliations might lie, these bosses are united in their dismay over the current limbo in which they are forced to operate.

Fully 93% of respondents to our latest survey believe the economic situation has either remained flat, or has worsened in the past 12 months. Looking to the future, business leaders are subdued about the prospect of the economy turning a corner – two thirds expect conditions to further worsen this year.

Under the current conditions many feel unable to plan beyond March. Almost half of the firms we surveyed expect revenues to fall or stagnate over the next twelve months. We’ve also seen an alarming rise in the number of firms who are putting hiring plans on hold for the next 1-3 months.

This matters. SMEs account for 99% of all private sector business and 60% of all private sector employment.

And yet, despite their evident frustration, our Index suggests that business leaders continue to view their current ‘holding pattern’ as a temporary situation from which they will eventually emerge.

Companies might be putting hiring on hold for the time being, but longer term attitudes towards recruitment and growth remain largely unchanged. The same is true when we look at attitudes towards profitability and product pricing.

UK SMEs remain bullish about their future post-Brexit. That optimism indicates two things. Firstly, it appears that business leaders are confident that the nuclear option of a no-deal Brexit will be avoided. And second, they continue to believe that it is possible to achieve a workable outcome before the cut-off date of 29th March.

There has been talk recently of an extending Article 50 to allow more time to negotiate a deal. Whilst this situation would appear preferable to a no-deal Brexit, the message we are receiving from business leaders is clear; they just want to be able to get on with things. That desire demands clarity.

As one of our regional Chairs George Hall puts it: “Regardless of where their political affiliations lie, most business owners are pragmatists. They just want to get on with things. I don’t believe any of the current discussions are taking into account SME realities where prolonged uncertainty and therefore postponed decisions could put some vulnerable organisations out of business.” 

There will be bumps in the road ahead. Brexit is just one of them. The current global slowdown is a concern, while the rapid emergence of new technologies such as AI and machine learning will require strong leadership and careful decision-making to deliver the type of long-term growth and prosperity business leaders aspire to achieve.

Evidence from our latest Confidence Index indicates UK business leaders believe they are up to this task. Some of our members and chairs will remember the financial crisis, when uncertainty and fear led many businesses to batten down the hatches to weather out the coming storm. It is also worth remembering however, that periods of uncertainty are almost always followed by periods of opportunity and innovation.

Certain things will always be beyond our control. The most successful business leaders have an eye on the here and now, but their focus will remain on building a plan that ensures they will remain competitive five or even ten years from now. With a strong strategy in place, you may find that uncertainty turns into an opportunity.