By Mark Craddock. Published on 6 October 2016
The latest report from the World Economic Forum (WEF), published on 27 September, lists the UK as the seventh most competitive economy in the world, up from tenth position in in 2015 and the country’s best ranking in the report’s ten-year history.
Since last year’s report the UK has leapfrogged Japan, Finland and Hong Kong, although there is still some work to do to catch up with the top three most competitive countries, Switzerland, Singapore and the US.
Why has the UK done so well? The WEF credits the UK’s leading role in digital and the support provided to entrepreneurs.
Before we pop too many champagne corks, however, it’s important to realise that this analysis came before the UK’s decision to Brexit. Pressed on the potential implications for next year’s rankings, the WEF hedged its bets, describing the UK’s relationship with the EU as “complex”. While the forum recognised some potential upside from the decision, in the short term the downside was seen as greater.
Other commentators, however, are far more bullish about the UK’s post-Brexit future.
Mathais Döpfner, CEO of German media giant Axel Springer, acknowledged there may be some short term pain, but saw opportunity in the longer term. Speaking to the Financial Times, he predicted that “in three to five years from now, my bet would be that England will be better off than continental Europe”.
Döpfner believes the UK has an opportunity to position itself as a “highly attractive” alternative investment opportunity to a mainland Europe in which money is moved from the more successful regions to those that face the greatest difficulties.
He went on to commend the UK’s free market influence on the EU and lamented “If it [future EU negotiation] is defined, let’s say, by France, Spain and Italy making compromises with Germany — I’m a little worried by that prospect”.
Mathais Döpfner is not the only positive voice. Amongst others, Sir James Dyson has been extolling the virtues of Brexit before and after the referendum. Dismissing the threat of tariffs imposed on the UK by Europe (“the EU would be committing commercial suicide… we import £100bn and we only send £10bn there”) Dyson’s main concerns about the EU stem from the impact it has had on his ability to attract the best talent.
Speaking to the Telegraph before the vote, he said:
“Sixty per cent of engineering undergraduates at British universities are from outside the EU, and 90 per cent of people doing research in science and engineering at British universities are from outside the EU. And we chuck them out!”
It seems Döpfner, Dyson and others may have a point. Somewhat hidden amongst the more doom laden headlines (“Brexit pushes 76% of UK CEOs to consider moving headquarters abroad”, “Optimism among financial services firms in the UK has slipped”) more positive data are emerging. The purchasing managers’ index (Market/CIPS) revealed that in September the manufacturing sector grew by its fastest rate since June 2014, leading Lee Hopley, chief economist at EEF, the manufacturers’ association, to describe the state of the industry as “considerably better than business-as-usual”. The growth was largely driven by the weakening of the pound post-Brexit, making exports cheaper.
Elsewhere, figures released by the Office of National Statistics on 30th September paint a rosier picture with the service sector growing by 0.4% in July alone.
Darren Morgan, an ONS statistician, said “Together this fresh data tends to support the view that there has been no sign of an immediate shock to the economy [from Brexit], although the full picture will continue to emerge”.
And that, of course, is the point. Everyone has an opinion on the longer term implications of 23rd June, but nobody knows for sure. As I write this blog the Chancellor, Philip Hammond, is warning of a “Brexit rolllercoaster” ahead. Few can deny, however, that the short term impact has been less dramatic and more positive than many feared. The more we can make the most of the opportunities now presenting themselves to us, the better prepared we will be for the long term, however bumpy the ride.