THE result of the Leave vote has left our economy in a serious condition. Despite Boris Johnson’s claim on Monday that the ‘pound is stable, the markets are stable’ by the end of the day Sterling had fallen to a 30 year low, the FTSE 250 had dropped by 13.6 per cent since the result of the Leave vote was announced, and the credit rating agencies have downgraded the UK economic outlook.
Yorkshire was among those regions which voted to leave the EU, but it is also one that may struggle the most if the economic consequences of the vote are not managed properly. Whatever your view, whether you continue to want to see us retain our EU membership, or you supported leave, the most important thing is ensuring that what already look like serious consequences of the vote don’t turn into disaster.
Yet just when we need it more, leadership at the top of our economy and our Government is suddenly found in a void. George Osborne’s attempt to reassure the markets on Monday fell on deaf ears, largely due to the fact his boss, the Prime Minister, already has one foot out the door. Meanwhile those who led the Leave campaign continue to promise much, but are failing to come up with a concrete plan for what needs to happen next.
Business and investors won’t wait around for ever to see some leadership. Many companies will simply pack their bags and go unless they see a path ahead. Meanwhile our smaller businesses, and particularly those in high risk / high innovation sectors, which are increasingly important to Yorkshire’s economy, will feel the squeeze as bank lending dries up as it did in 2008.
The next few years are likely to be dominated by discussions of what our relationship with Europe looks like for the future, but the immediate priority must be to provide reassurance and support to business owners, investors and workers.
We believe that, in order to protect Britain’s economic interest, two things must urgently happen.
The first can only be done by the leaders of the Leave campaign – those who wish to lead us into the new unknown - and in particular, Boris Johnson. He must now show his vision for the UK and provide a clear plan for what Britain’s relationship with the EU will look like. To reassure the market he, and any other potential future Prime Minister, needs to make clear that membership of the Single Market is the priority ask for any negotiations. Businesses need to know that, whatever else, their key business relationships will not have to fundamentally change.
It will require real leadership, rather than populist platitudes, from the man who has so long wanted to be Prime Minister. It may mean securing a deal which pleases no one and does not address many of the concerns raised by leave voters about immigration and freedom of movement. Leading is about making choices, it’s now time for Boris to tell us his.
The second urgent priority must be the responsibility of the current Government. There is now a very real likelihood that we are heading for a Brexit recession. If the Government act now, by abandoning their already unnecessary financial straitjacket and allowing capital investment and stimulus support to flow into precarious parts of our economy, we may be able to avoid the worst impacts on jobs and livelihoods, but it will require aggressive action from the Prime Minister. He cannot simply sit back and wait for retirement.
Of primary concern must be our most innovative industries. Those business on the cutting edge are likely to see funding from traditional financial institutions dry up as banks revert to their core business model. Given serious financial help and stability to these industries is vital in ensuing their long term future in the UK.
Thankfully, Yorkshire may hold part of the answer. In Government Liberal Democrats set up the British Business Bank in Sheffield. This publically owned institution has already had a huge impact in supporting businesses who were not being served by the banks. Never has its role been so crucial as it is today.
That is why we are calling on the Government to make available significant capital resources to the British Business Bank in order to engage it to expand its provisions of loan guarantees, overdraft and bridging capital to businesses in high innovation sectors such as the digital economy.
We should ensure that our growth businesses are given the same kind of commitment that the Bank of England has rightly shown the banking sector in funds available to support their liquidity.
This cannot wait. The high tech manufacturing and technology companies that have grown so much thanks to the support put in place by the Coalition are now at real risk of leaving the UK or collapsing completely.
Berlin is already challenging as a major competitor as the home for these new and innovative industries and they are more than prepared to entice new start-ups and scale up businesses to Germany. It would be a tragedy if they now die off or relocate as a result of this massive self-inflicted wound.
Sorting out the long term implications of last week’s vote will take time. Rome was not built in a day, but what is vital is that those who purport to be in charge of our country do not simply sit and fiddle while Rome burns either. It’s time for Boris, Cameron and Osborne to act.
Tim Farron is leader of the Liberal Democrats while Vince Cable was Business Secretary in the 2010-15 coalition Government.