The Brexit debate is a social, cultural and political one. For occupiers, however, business decisions are based on facts, not crystal balls. No matter their size or sector, the Brexit debate is unearthing different views on what the actual economic impact of an out vote would be, writes Andrew Heard of Cushman & Wakefield in a blog post about the UK referendum in June on membership of the EU.
Propelled by globalisation, worldwide events are carrying more clout, and the Brexit debate comes at a time of many other headwinds. But – at the same time – it is important to note that opportunity can be the bedfellow of uncertainty, and we are already seeing selective re-organization among occupiers as a result.
With the referendum looming, all eyes fall on an in or out decision. The former is arguably a much simpler scenario to assess, irrespective of which business sector you operate in. Should the ‘Yes' vote prevail, yes, economic and property market uncertainty will continue in the build-up to the referendum. However, there also remains the potential for a better than ‘business as usual’ outcome, with a boost to demand as occupiers who have delayed decisions now press ahead.
In contrast, the aftermath from a vote to leave the EU perplexes even the brightest minds throughout the business world. Scenarios span the good, the bad and even the ugly while timeframes associated with each outcome remain dictated by how long and protracted negotiations become.
If the UK votes to leave, the good would see businesses take the vote in their stride. After all, the UK could and should remain a flexible, open, dynamic and highly innovative economy. Occupiers might simply assume that a free-trade agreement with the EU would be reached, regardless of the type of exit, compounded by business optimism about the cutting of so called red tape, allowing for the UK to hone in on its strengths. The UK and London in particular will remain global talent magnets and in return continue to attract the increasingly talent-hungry global corporations.
The bad would see levels of uncertainty significantly impact occupier decision-making in the short- term, leading to a retrenchment in demand over the next few years. Uncertainty would not, however, be so severe as to completely re-shape the location strategies of those taking a longer-term view. Belief that the UK remains a core market for doing business would help retain its key-business backbone, in a market unshackled from European regulation.
Finally, the ugly would see the severity of uncertainty remain elevated for a prolonged period, with no clarity on what an EU exit might eventually entail. With 'divorce' negotiations proceeding slowly, a substantial shift in the business environment would mean reduced levels of commitment by occupiers to the UK and wider European economy. Uncertainty about their employment framework could push many highly qualified EU professionals back to the continent. Similarly, the exit of the UK education system from the EU could affect the net graduate gain for the UK economy, with the ‘brain drain’ inevitably pushing global corporates to rebalance their footprint. Winners could be the countries that traditionally send a large workforce contingent to the UK, such as France or Central Europe.
These views are, of course, already being heavily disputed with no single, unified business voice. Size and sector will inevitably lead to varying visions, while the tangible facts available at present – or more precisely the lack of them – surrounding what an exit world would actually look like, remain a key stumbling block. Whatever the outcome, occupiers will continue to be influenced by various other factors: operating costs, regulation, market access, availability of skilled talent and the UK’s global standing.
Be it good, bad or even an ugly outcome, there is only one certainty: there will be winners, and there will be losers.
Andrew Heard is a research analyst covering office, industrial and logistics markets in UK and EMEA at Cushman & Wakefield
