Market Update: Where are we Post-Brexit?

The results of Markit’s recent PMI (the Purchasing Managers Index) survey has the put the minds of the British public at ease (for now) as the unexpected rebound of the service sector adds to a string of positive market news on exports, jobs and houses.

Markit recorded the biggest month on month increase in the survey’s history and shows figures increasing from 47.4 in July to 52.9, far exceeding the 50 mark needed for growth.The service sector makes up a staggering 80% of the UK economy

 

From these results it is now clear that Britain will avoid the expected recession many thought would follow after the June's historic vote.

"The services PMI completes a triple-whammy of good economic data for the UK in the last three trading sessions and indicates that businesses are returning to normal after the initial shock of the vote rocked confidence," said Neil Wilson, a financial market analyst at ETX Capital.

 

Britain’s economic situation is looking brighter with the value of the pound going up on a seven week high against the value of the dollar - $1.3375, and the value of the pound beginning to steady.

Credit Suisse and Morgan Stanley have both 'rowed back' on their predictions after the better than expected results. Bank of England Governor, Mark Carney, has described himself as feeling 'absolutely serene' with the banks preparations and actions which he says allowed Britain's economy to 'sail through' the shock impact following the referendum.
 

The City of London, however, is not sitting on its hands and has already stepped up lobbying efforts with the new Chancellor Philip Hammond to ensure that processes are not rushed and to stress the importance of access to the single market. The Financial Services industry accounts for more than 12% of the UK's exports, contributing £60 billion in tax and employing 1 million people.

How are the Big Four after the Brexit vote?

Deloitte

Deloitte’s UK revenues have grown at the fastest rate in a decade, according the latest figures.The company experienced a “landmark” year in Scotland, strengthened its Transaction Services practice in the North of England and Group revenue for Deloitte has increased by 11.2 per cent for the year to May 2016 to £3.1bn.

Managing Partner, David Sproul, has suggested that the government should not reduce hiring skilled migrants: “The government must recognise that further restricting skilled migrants could be detrimental to the UK’s ability to attract global investment and the diverse pool of international talent that has supported our country’s growth”.
 

KPMG
 

KPMG continues to be the preferred UK's auditor for stock market clients, having created six new contracts in the last quarter. The Head of KPMG's deal advisory practice in the Midlands has stated that there is still a healthy appetite for deals in the region describing the environment as conducive.  

 

PWC
 

PWC remains in second place behind KPMG with 369 total clients and has come out confidently stating that London's dynamism means that it would remain agile and resilient to any potential fallout from Brexit and that the City had managed to  'pull away' from other global rivals this year.
 

EY
 

 EY has noted the opportunities for businesses that will come as a result of any renogiations and has stated that due to UK's strong performance in the past year it has retained it's spot as the number one place in Europe for foreign investment.

 

The future is looking a lot brighter than many experts initially thought, we now await to see how the new government intends to take Britain forward.
 

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The Recruitment Industry takes the Brexit debate head on!

The recruitment industry is worth a valued £26bn a year to the UK economy. With the upcoming European referendum, businesses have been trying to constructively contribute to the debate and give analysis of what the impact might be. Reports from within the recruitment sector have been mixed, some worried about a potential skills shortage with others adopting a more relaxed approach.

The Association of Professional Staffing Companies (APSCo) has been representing professional recruiters since 1999.  APSCo has become a trusted badge of quality within the sector, with an increasingly international profile. For many years its trade delegations have supported the global growth of its member organisations. With the upcoming referendum British membership of the EU, APSCO produced a report on the issue to help inform its members.

Findings from APSCo Report (2016):

·     Two APSCo surveys, in the summer of 2015 and in February 2016, found that support for remaining in the EU had significantly dropped from 80% to 59%, suggesting a growing unease with the status quo

·     For recruitment firms, social and employment policy is one of the most controversial areas of EU competence. Agency Workers Regulations (AWR) and the derived Temporary Agency Workers Directive is viewed as inappropriate European legislation for many professions with ‘no corresponding positive benefits for the independent professionals placed’.

·     From a recruitment standpoint, the Services Directive is the most important concession from the Prime Minister’s renegotiations with the EU, allowing UK firms to get full access to the EU services market. The Services Directive would add 1.8% to overall EU GDP.

·     Any provisions for leaving the EU should be drawn up in consultation with the private sector to ensure that the UK is not left at a disadvantage compared to EU states in terms of competitiveness

APSCo Scottish Forum Debate

APSCo’s Scottish Forum made its own personal contribution to the issue by bringing the debate to their Glasgow meeting, hosting three prominent speakers: John MacLeod (ICAS), John Edwards (Scotland Stronger In Europe) and Iain McGill (business owner). The debate, chaired by Abigail Stevens, Managing Director of Think Global Recruitment, allowed three perspectives: neutral, for and against, with respective proponents providing their own analysis on the issue concluding with questions from APSCo members.

John MacLeod, Partner at Mazars UK, first spoke about ICAS’s official report and how their assessment concludes that rather than a factual decision, people will be heavily influenced by perceptions of subjective issues such as immigration, fairness and national interests. ICAS’s objective report gave an independent review of all of the key figures at play and can be read here. He stated that his job, as a neutral contributor, was sometimes the most difficult ensuring impartiality in all of the assessments.

With neutrality set aside, it then came time for the big debate. As people say that they want to hear the facts, without transcribing the whole debate, and to bypass the hyperbolic statements we have summarised some of the main points.

Four key points that can be concluded from the debate:

-      Three territories have left the EU or European Economic Community

Two territories, Greenland and Algeria, left the European Union’s predecessor, the EEC. The Caribbean Island of Saint Barthélémy withdrew from the European Union in 2012 and instead joined the Overseas Countries and Territories List.

-      Whatever the outcome we will have terms settled by 2018

Under Article 50 of the EU’s Lisbon Treaty, the UK will have two years to negotiate an exit, during which time its future relationship with the EU will have to be agreed. The UK would continue under the European Union until that time and by 2019 there will be some degree of certainty as to its position within the continent.

-      If the UK votes to leave, unelected European officials will still retain some power

The European Court of Human Rights will still have an ability to overturn the UK High Courts on social and employment issues as the UK will remain signed up to the European Convention of Human Rights. However, the unelected European Commission (Europe’s governmental cabinet) would lose its authority to create legislation.

-      It’s impossible to know the economic impact of an exit

Although this might not have a numerical weighting attached, it actually has more value than any of the campaign statistics. Since most of the economic arguments are based around future trade negotiations it would be impossible to determine what the economic situation post-exit would look like. There was mutual agreement in the debate that it would rely on a fair amount of ‘crystal ball gazing’ with both sides using alternative figures and experts.

As expected from these debates, it managed to result in more questions than answers. The purpose of this blog was to highlight some of the key issues to the recruitment industry and help assist in answering some of the uncertainties around the referendum. We hope that you have found this article useful and would encourage additional reading on the subject.

APSCo, ICAS, Mazars UK and Think Global Recruitment would like to confirm their neutrality on the referendum issue. Iain McGill was speaking in a personal capacity and John Edwards was speaking on behalf of Scotland Stronger in Europe. We would like to thank all those that contributed to this article through their reports or arguments.