Senior Partner and Chief Executive of Deloitte UK
The government's announcement today that it has triggered Article 50 is the first formal step to our country's exit from the European Union. While symbolically this is undoubtedly a watershed moment and will receive widespread media attention, in reality as of today, nothing has changed. The fundamental strengths that make the UK an attractive place to live, work and invest remain, and the government has made clear it recognises the importance of reinforcing these if the nation is to prosper after Brexit.
With a well-established legal and political system, strong infrastructure, and a language that is used throughout the business world, we should be confident in the UK's ability to withstand the uncertainties of leaving the EU. The nation's economic resilience since the referendum has not seen the predicted collapse of growth, with the Bank of England forecasting average GDP around 1.8 per cent for each of the next three years. That compares with some market estimates in August last year of just 0.6 per cent for 2017. Equity markets have rallied strongly since the initial shock of the referendum result and sterling depreciation has given a boost to exports, encouraging a rebalancing of the economy from consumer-led to export-driven growth.
Chancellor Philip Hammond made clear that the aim of his recent Spring Budget was to help create a "strong and stable platform" for the exit negotiations and "get Britain match-fit" for its new global role. As part of this, the Chancellor unveiled a £500 million a year investment to improve technical skills, helping ensure our young people are equipped for the workplace of the future and that businesses are best placed to take advantage of technological advances in a post-Brexit world.
In the context of many positives businesses must still continue to plan for an exit in 2019, several years of trade negotiations, and most likely a transitional phase to bridge the two. And while the hope is the UK can secure the best possible deal on trade and market access, businesses must continue to consider for scenarios of the greatest change. For many businesses, including our own, access to skills is one of the most pressing issues. The services sector contributes nearly 80 per cent of the UK's GDP and therefore mobility of people should be as high a priority as trade in the negotiations. We must retain the diversity of skills in the UK.
As the government begins conversations to formally leave the union, recognising different mind-sets across the different EU-27 nations will be critical to reaching a deal. While Brexit is a priority concern for the UK government, the member states are focused first and foremost on their upcoming national elections, with EU cohesion and its long term stability coming a close second - with the US political environment third. It's likely, therefore, that future negotiations will focus particularly on protecting and enhancing EU cohesion and avoiding referenda in other countries.
However, each nation will also have its own domestic agenda – whether defence and security in Eastern Europe or the push for Catalan independence from Spain - and the UK will need to tread a diplomatic path to balance these points. It's also important to remember that this will not only be an economic argument. While the UK sees the EU as an economic union, for the other 27 nations the EU has primarily been about social justice and a mechanism for promoting peace over the past 70 years. That's why EU leaders have repeatedly stated that the four treaty freedoms must be honoured in full.
It's widely acknowledged that both sides may be willing to take some economic pain in order to protect their negotiating positions and other political beliefs. By better understanding the negotiating priorities of the 27 countries, the UK government will be in a stronger position to influence the outcome of the talks and agree a deal that will maintain the UK's status as an open and thriving economy.
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