We have witnessed one of the most tumultuous and unsettled 12 months in the UK in a generation.
From the Brexit vote on 23rd June 2016 to the General Election on 8th June 2017 the country seems to have been on a roller coaster and there is no doubt we haven’t reached the end of the ride, as this is being written . It seems as if many of the old certainties have been swept aside, and a quiet revolution has taken place, almost by default. It is unlikely that the sequence of events were planned by one individual, a political party or even a scheming foreign power. No one has taken to the streets waving banners but many aspects of life and our economy have changed and will continue to change.
The business of Stratton Creber Commercial is commercial property in all its varied forms, and we have been pretty successful, on behalf of our clients over the past 20 years. But we need to appreciate that with the quiet revolution, we need to be ever mindful of changes which potentially threaten our clients assets and decision making , but which also throw up new opportunities .
The departure from the EU , be it soft or hard , will force wide ranging changes – many of which may not immediately impact on Plymouth , but which may cause a decline in GDP , perhaps only temporarily as the country adjusts to finding new markets and making new alliances (or rekindling old ones) . This will inevitably entail a change to the legislative framework for business and many aspects of life. Agriculture and fishing , major aspects of traditional and economic life in the South West generally , will undoubtedly be impacted and these are industries which are not easy to change within a timescale of , say , 4 or 5 years . Vegetable and flower growers in the immediate locality and wider South West have become accustomed to the flow of essential labour from Eastern Europe. Not “cheap labour” as is sometime said , they will all be earning the minimum wage in UK , but that is a good wage when sent home to Bucharest or Warsaw. How will the farmers and growers replace that labour to keep the Cornish cauliflowers and daffodils on the shelves of Tesco and Sainsbury’s?
The economy and the property market continue to send out mixed messages. The authoritative Ernst and Young (EY) Attractiveness report May 2017, on the state of the nation and the level of Foreign Direct Investment (FDI) has stated that he South West is being left behind with poor levels of growth and sustainability in a range of sectors, and the loss of euro support through programmes such as ERDF and convergence funding may only deepen the divide with areas such as the South East and Midlands. Major investment from sources such as China and Middle East are still flowing into London and Scotland but 30% of business leaders expect this to fall in the coming 3 years as Brexit becomes a reality.
Over dependence on the defence industry in its widest form , including aspects such as the future of the Royal Marines and nuclear submarines , will impact to an increasing extent , especially if , as seems most likely , the economy shrinks in real terms in the years following the final divorce absolute from Europe . Plymouth in particular but, also other areas of the south west – Taunton, Lympstone, Chivenor, Culdrose, Yeovilton remain at the mercy of periodic “Defence reviews”.
The chairman of Plymouth and Devon Chambers of Commerce has warned of the risks to business and employment in the city and the region arising from the changes which will flow, but which are not yet recognised or being taken into account in decision making . Plymouth has a narrow and fragile manufacturing and employment base, with over dependence on the public sector, defence spending, the University and the student sector. The latter in particular must be viewed with caution. A combination of the regime of high tuition fees and changing attitudes from schools and their pupils towards the old certainty that, if you were able, University would inevitably follow year 13, and thence to a job or career for life, is likely to erode the numbers of students coming to the City. Even a Russell group University like Exeter is beginning to see student numbers becoming a cause for disquiet, not yet concern.
From all this uncertainty, what advice should we be giving to clients who will still expect their assets to perform and their resources to follow the opportunities? As with other aspects of the changing society and our economy, we need to be constantly vigilant and considering whether a particular sector is right for the medium and long term.
Where are the threats? Is it the local, regional or national economy? Everyone in business and we as advisors to our business clients must constantly ask – How will the inevitable departure from European Union and in particular the loss of support which this region enjoys, affect my sector or my business and investment.
The watchword for the election, so recent but already a feature of history was “strong and stable”, where the emerging situation would appear (without any party politics) to be quite the opposite. But the words of Harold Wilson 50 years ago remain so true and some would be advised to remember them – “a week is a long time in politics”.
One would echo that the same is true for so many businesses in the South West, the old certainties have been swept aside by the Quiet Revolution.
Stephen Matcham FRICS