I must confess that I’m a little wary about wandering into the turf marked ‘EU Referendum’ but wander, and wonder, I will.
It’s my long-held view that all investment decisions are a cocktail of the rational and emotional, and I suspect considerations about how to vote on June 23rd will be no different.
Yes, the business case must make sense, but who ever really believes the neat numbers laid out in glossy business plans?
Truth is, in every business proposition there are always risk factors, the ‘known unknowns’, as well as those pesky ‘unknown unknowns’, and essentially, this is the territory inhabited by the case for, and against, Brexit.
The recent BBC ‘Europe: Them or Us’? TV programme was an excellent reminder of the continually fraught relationship between Britain and our continental neighbours, of how positions for and against a closer relationship continually transcend traditional political fault-lines.
Winston Churchill and Tony Blair supported greater integration, whilst Tony Benn and Enoch Powell were vehemently against.
Since the end of the Second World War the European question has created endless angst, leading to new alliances, with those at the extreme of either end holding their belief as an almost quasi-religious act of faith.
As I write this article, Barack Obama has flown into London with an appeal for us to stay in the club. Bodies, ranging from the IMF and World Bank, to our own Bank of England, appear to be saying the same.
However, some might say is not one of the lessons of the past decade the amazing ability of these august bodies to get the big issues wrong? I don’t remember any of them calling out the economic crash of 2008.
Amazingly, weirdly even, both sides have now started to predict how famous dead people would have voted.
Marketing Derby is charged with attracting investment into the city and so the question I have to ask is; what will be the impact of staying or leaving the EU on inward investment?
If there is one thing I’ve learnt in the past 10 years, it’s that investors do not like uncertainty…in fact, they fear it.
Uncertainty stains those shiny business plans and, as a consequence, masterly inactivity becomes the strategy of choice.
We saw this phenomenon last year in the build up to the General Election.
During the spring of 2015, all the talk was of a hung Parliament, with a predicted political fog shrouding Big Ben whilst government portfolios were negotiated in secret. In other words, uncertainty.
Then, the surprise result delivered a clear win for one party, the fog lifted and the world carried on with investments previously on hold, being released.
The EU referendum is having a similar effect.
Cushman and Wakefield has reported a drop of 31.8% in year-on-year deal volume for the first quarter of 2016 as uncertainty over Brexit takes hold.
Whilst to some this might be explained by a drop in global growth (the IMF has revised its prediction down from 3.4% to 3.2%), Cushmans still expect a further decline in the second quarter.
Put simply, this is the price of uncertainty and until a decision is known, either way, investment will stall.
The Billion Dollar question is what will happen on Friday 24th June?
If the UK has voted to stay, most commentators expect a repeat of 2015, with investments released. Cushmans predicts a rapid catch up in the second half of the year.
A vote to leave will be different with uncertainty extended, at least in the short term, whilst timetables for the terms of exit are negotiated.
In terms of inward investment, the situation could be quite uncertain.
The Editor in Chief of the Financial Times fDi Magazine, Courtney Fingar, gave an interesting presentation at our Derby Embassy event at MIPIM in March.
She showed that international investment flows have been growing consistently for nearly two decades and how the UK performs very well. In fact, we are second only to the USA in terms of destination of investment.
In real terms US$83billion was attracted into the UK from emerging markets.
The interesting fact is that 58% of those projects came to the UK in order to access the European ‘regional’ market, 32% accessing the UK ‘domestic’ market and 5% accessing the ‘global’ market.
The best way to understand this in local terms is that Toyota fits the regional category, Webhelp the domestic and Bombardier the global.
So, it’s the 58% at risk but we simply do not know how much of that would be lost, or whether it would be replaced.
People ask for the facts, but facts will not tell us how to vote.
In the end, it’s an emotional call to be made alone in the ballot box.