NORA Senior, who chairs Scottish Chambers of Commerce, has summed up the economic state of play well.
The third paragraph of her speech to Scottish Chambers’ annual business address, the text of which was issued under embargo ahead of last night’s dinner in Glasgow, was as pithy as it was true.
It went thus: “Well here we are again – and as the saying goes, ‘We are where we are’. But the problem is, I am not at all sure that anyone knows exactly where that is right now.”
READ MORE: Chancellor Philip Hammond dashes First Minister Nicola Sturgeon's hope of Scottish Brexit deal
Of course, there are no prizes for guessing that the reason for the nauseating disorientation many people are feeling is Brexit. The Brexit vote has, for sure, broken the economic sat-nav (and no-one in the UK Government seems to have any idea about how to even start going about fixing it).
The fourth and fifth paragraphs of the speech went as follows: “We are working in extraordinary times. The result on June 23 ushered in a changeable future, triggering an untested process for leaving the European Union.
“The future is uncertain – that is the only certainty there is. And as we are all aware, uncertainty is not the best environment for business to prosper.”
It would surely be difficult for even the most strident Brexit supporters to challenge any of these points.
Of course, that is not to say the Brexiters will not challenge them, especially given the seeming greater distrust of the business community that Ms Senior noted appeared to have played a part in the EU referendum debate. And Ms Senior’s reasoned consideration of the UK’s economic prospects in the wake of the Brexit vote, and analysis of the inevitable consequences for businesses, is unlikely to have been music to Brexiters’ ears.
She noted the UK was facing the prospect of significantly lower economic growth next year. The Office for Budget Responsibility forecast last week that UK growth would slow from an already below-trend 2.2 per cent in 2016 to 1.4 per cent next year.
READ MORE: Chancellor Philip Hammond dashes First Minister Nicola Sturgeon's hope of Scottish Brexit deal
Ms Senior also noted annual UK consumer prices index (CPI) inflation was next year poised to rise above the Bank of England’s two per cent target in 2017, at least partly because of the rising costs of imports following the post-Brexit vote tumble in sterling. Hard-pressed households seem certain to have to endure further misery in coming months as the costs of food, and other goods and services climb.
A survey published yesterday by the Chartered Institute of Procurement & Supply meanwhile underlined the cost pressures being faced by the UK manufacturing sector, which saw its growth slow in November.
The CIPS survey showed growth of UK manufacturers’ export orders slowed further in November. Meanwhile, a survey from Scottish Engineering, while indicating its sector appeared to be turning a corner in terms of overall order inflow after a very grim period, showed new export business continued to decline.
There seems to be far more evidence of damaging effects from sterling’s weakness, in terms of cost pressures for companies and the looming surge in annual CPI inflation and its knock-on effect, than there is of the export boom envisaged by some Brexiters.
It was good to see Ms Senior emphasising businesses wanted certainty on the key issue of access to the EU single market with free movement of goods, services, capital and labour.
Free movement of labour has been a bone of contention picked at endlessly by the Brexit camp, in some cases seemingly because of xenophobia.
In contrast, the prospect of anything other than free movement of labour has raised very understandable fears in the business community.
It has also created lamentable uncertainty for people from other EU countries already living in the UK. And it has fuelled fears among businesses that key workers might just leave the UK anyway, given the length of time it is likely to take to get any clarity on the issue. This whole sorry situation is being exacerbated by the inability of Prime Minister Theresa May or her Government to lay out any credible plan to try to mitigate the inevitable damage from Brexit.
In the context of free movement of labour, it was interesting to see Mrs May being urged this week by MPs to “consider further” the idea of devolving immigration powers to Holyrood. The House of Commons Scottish Affairs Committee warned that Scotland’s failure to keep pace with the UK’s population growth could damage future economic prospects.
The UK Government has indicated previously that it does not feel a separate immigration policy for Scotland would be “appropriate”. Just like it seems determined to refuse Scotland any bespoke deal on Brexit.
However, the Scottish information technology and engineering industries have been among many to hammer home their need for the skills of workers from other EU countries and from further afield.
Meanwhile, NFU Scotland revealed yesterday that a huge coalition of UK food producers had written to Mrs May and First Minister Nicola Sturgeon calling for tariff-free access to the single market in the wake of Brexit and continued access to labour, warning affordable food was “at risk” otherwise. Ms Sturgeon seems well aware of the benefits of single market access. Mrs May’s position is less clear.
READ MORE: Chancellor Philip Hammond dashes First Minister Nicola Sturgeon's hope of Scottish Brexit deal
Ms Senior warned slowing growth and rising inflation would stem the rise of real incomes, as businesses pared back wage increases and recruitment and cut costs and investment.
The fact is that, while the ultimate nature of Brexit may be uncertain, businesses will have to take steps meantime. As Ms Senior warned, this will impact on productivity, which is already poor and also, crucially, jobs.
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