More encouraging news on the UK economy. The PMI (Purchasing Managers’ Index) – measuring factory activity – records the biggest monthly rise in 25 years. In August it hit 53.3 up from 48.3 in July. Above 50 means expansion. It’s forced the pound up 1% against the dollar and 0.9% against the euro today.
The predictions that the vote to leave the EU would lead to an economic collapse seem not to have been vindicated, at least not yet. Ah, say Brexit-sceptics, but only now are big bosses coming back from sunning themselves on yachts and in Tuscan villas, with their minds and pens sharpened for an autumn of synergies (cuts) and strategy (laying people off). Now they’re back, said a Remainer friend yesterday, the **** is going to really hit the fan. The collapse has only been delayed, he said, and the rise in house prices, good figures from the high street and healthy manufacturing scenerio are mere diversions before Brexit destroys the British economy and we are all murdered in our beds.
Perhaps, although I doubt it. But look at it this way: as the corporate titans step back into ‎their air-conditioned London offices and host their 7.30am senior management team meetings, what are they going to be hearing?
Big Boss Man: “Giles. How’s it looking on consumer sales?”
Giles: “Pretty good. My team have done some blue-sky thinking and turned it into a deck of slides for you to look at later. ”
Big Boss Man: “Giles, I like your style. That’s a nice tan. Did you spend August on a yacht? How big is your yacht?”
Giles: “We could see yachts from our (tiny) villa.”
Big Boss Man: “Helena, run me through the manufacturing picture.”
Giles: “Encouraging but we await the services industry number. That will tell us a lot too…”
Big Boss Man: (remembering something he read in the FT and trying to look like he understands economics): “But the fall in the pound after June 23rd must have driven up import costs?”
Big Boss Man is right, of course, but there is rarely unalloyed good news. Anyway, haven’t we long sought a rebalancing of the economy to boost exports? Yes.
What matters so often in those team meetings (having been in the media version) is sentiment and the climate in which decisions are taken, based on some rough data and some imperfect instinct. Now ask if that fictional boss is really going to be quite as depressed about Brexit as he was in late June? Is he sweeping back in preparing to close down chunks of the business while building a nuclear-bomb proof bunker? Or will he detect something else other than toxic fall-out in the air?
Leaders in business are governed by the fear of losing money, looking stupid by failing to serve customers and shareholders and losing their jobs. All of those things are linked.
But they exist to make money and spot chances to grow too. When the national picture goes from the anticipated “this autumn will be a disaster” to “actually, it might be ok, there’s some opportunity here” they are unlikely to all as one slash and burn to prove right the vocal minority of Remainers and Twitter warriors who seek vindication in national collapse.
Brexit will be tricky to manage, only a Panglossian would think otherwise. But even without it there will be bad news along at some point. Eventually, there always is. Economic and human development in the West since the industrial revolution has been about peaks and troughs, with the long trajectory in terms of innovation, comfort and income pointing steeply upwards. The main thing, we know, is, wherever possible, to avoid a major war. The disastrous First World War detroyed open markets, cost Britian a fortune and set Germany on the path to Hitler and the Holocaust. Compared to that, Brexit is a mere adjustment, albeit a geo-politically significant development. It is not the end of the world, however. One (albeit terrific) nation state such as Britian renegotiating its trading and political arrangements is an economic blip rather than a reason for abandoning ship.
One of the downsides of the modern approach to economic management is ‎that the understandable obsession with ensuring we never experience recessions, ever, forces our policy makers into desperate policies aimed at keeping the show on the road. It means we have become addicted to every tremor and forget that economies are dynamic and difficult to chart and predict in precise detail.
Brexit will not be simple, but Britain will be ok, and do even better than that if the right decisions are taken after we leave the EU.
