Brexit: A Year After
By Christos Cabolis
It is a little more than a year since Britain surprised pundits and analysts by voting to exit the European Union. In the last few months, economic and financial publications have been comparing the evolution of different dimensions of the economy. The general picture is not encouraging with consumer prices rising above the Bank of England’s target, real weekly earnings decreasing, and the pound declining in comparison to the dollar and other currencies.
Nevertheless, it is interesting to examine the perceptions of the people in Great Britain towards issues that may affect the economy in the medium run. In the current edition, I will concentrate on the IMD World Competitiveness Center’s Executive Opinion Survey to identify whether the participants’ perception of future prospects changed after the referendum.
The Executive Opinion Survey is the outcome of a questionnaire which is completed by mid- and upper-level managers in a given country. Participants can be local or of different nationality; the only condition is that they have lived in the country under consideration for a minimum of one year. The Survey Data measure competitiveness as it is perceived by the participants and reflect current and future opinions of different issues affecting an economy. The Survey takes place between the months of February and April every year. So, it provides a great tool to evaluate the perceptions of the participants from Great Britain regarding the 2016 referendum. While the 2016 responses were received before the referendum, the data from 2017 undoubtedly provide opinions that reflect the future of Britain outside the European Union.
Given the divisive campaigns and extreme positions held by the two sides before the referendum, the first issue to explore is naturally whether responses reflect a change over the social cohesion in the country. Exhibit 1 reflects a substantial change in the perception of the participants. Whereas in 2016, 38% of the respondents felt that the Social Cohesion was high, in 2017 only 17% agreed with this statement.
The country’s integration in the international economy, was an important topic during the campaigning last year. Exhibit 1 also shows that even though 57% of the respondents agreed to a positive attitude towards globalization for the country, a year after this number dropped to just 36%.
A criterion that affects international investments is the presence of political instability. Given that the outcome of the referendum will require long and hard negotiations, the managers’ perception of the risk of political instability worsened significantly within the year. Thus, while in early Spring of 2016, 81% of the respondents agreed that the risk of political instability was low, Exhibit 2 shows that in 2017, just 47% shared the same opinion.
Finally, the image that a country projects is an important component in making the economy appealing both in the international talent pool as well as in the international investment communities. As can be seen in Exhibit 2, in 2016, 80% of the managers in the UK who participated in the survey believed that the image of the country abroad encouraged business development. In 2017, only 54% of the respondents felt that the image abroad was fostering business development.
The negotiations over the exit of Great Britain from the European Union have not yet started, and the real effects of the exit will materialize when the split takes place. However, the picture that we currently capture from the participating executives in the annual survey is considerable grim.