How Britain can Rebound after Brexit

Pound Rates
Screens, one of which displays the rate of the British pound dropping against the U.S. dollar, after the U.K.'s EU referendum, in a trading room, Paris, France, June 24. Jacky Naegelen/Reuters

From the outside, the referendum the U.K. has just endured on its membership of the European Union (EU) may have seemed unintelligible, dominated as it was by outlandish claims from both sides. Moderate voices were drowned out in the shouting match. At times, I was reminded of the 1921 poem, 'The Second Coming', by W. B. Yeats: "The best lack all conviction, while the worst are full of passionate intensity."

The Institute of Directors (IoD), Britain's oldest organization for business leaders, did not campaign for an outcome in the referendum. We did, however, point out that around two-thirds of our members would vote to remain in the EU, motivated by the benefits of access to a single market of hundreds of millions of consumers and to skilled EU workers. Now those benefits are in jeopardy, the best way to describe the British business community is anxious.

We ran a survey of our members, companies of all sizes based across the U.K., immediately after the referendum result was announced. There were some worrying initial signs. Over a third of the company directors polled said that Brexit would lead them to cut investment, a quarter were planning to freeze recruitment of new staff, and around 5 percent actually thought they would be forced to make redundancies.

Perhaps even more concerning, around one in five said they were now considering moving some of their operations out of the U.K. Our survey was followed by announcements from the financial sector that plans were being made to move staff, with HSBC suggesting that they could shift 1,000 jobs to Paris if the UK leaves the single market (though now thankfully it has decided to stay in London).

I do not want to overstate the reaction. Emotions were running high in the first few days after the vote, with the stock market diving and sterling collapsing against the dollar. Both have since regained some ground, and once business leaders have had a few days to assess the situation, I am sure that determination to make the best of it will win out over the immediate panic.

After all, it was not long ago that the U.K. was congratulating itself for being one of the fastest-growing developed nations, with low unemployment and inflation. We should not forget that Britain has notable strengths in financial and legal services, and is a leader in the digital economy. This is a political crisis, and that means the solutions must also be political.

In the prime minister's resignation speech, David Cameron stated he would leave to his successor the decision as to when to trigger Article 50, the provision of the Lisbon Treaty that begins a two-year process for a member to leave the EU. We are now in a brief hiatus, giving time for tempers to cool, and the Members of Parliament who wish to succeed David Cameron as PM to refine their pitches for leadership.

From the point of view of businesses, the hopefuls must clearly spell out how they see the U.K.'s place in the EU's single market and, crucially, what this means for the free movement of people across the Union. It is all well and good to say the U.K. should have access to the single market, but that can mean many things, and U.K. companies need more detail on the tariffs and regulations that they will be subject to.

We have had far too much wishful-thinking and half-truths in recent months, and now is the time for politicians to be honest and direct. We urge the candidates for Conservative party leader to be straight with the public that the U.K. economy still needs the skills of EU workers, who contribute taxes and make firms more productive.

The new prime minister's first priority must be sealing a new deal with the EU, but we would also like to hear their vision for how the U.K. thrives on the outside. For a long time, British politicians have blamed Brussels for creating excessive red tape for business, which makes firms less agile and able to seize new business opportunities. Once we leave, there will be no-one else to blame, and parliament will have to finally accept most business costs are imposed by domestic legislation. It is time for an audit of all red tape, domestic or European, to see what can be scrapped.

Much has also been made of the ability of the U.K. to make its own trade deals outside the EU. This is true, but before it can happen, we will need to beef up significantly our team of trade negotiators. At the moment we have a measly 40.

Businesses are resilient and adaptable, and when Brexit throws up opportunities, they will be sniffed out by entrepreneurs. During the referendum campaign we were promised the U.K. could be an open, outward-looking, trading success story on its own. Now is the time to spell out how we get there.

Simon Walker is director general of the UK Institute of Directors