Barely a month into the EU referendum campaign and already the normal functioning of our economy and commercial organisations is being undermined. Bewildered by political claim and counter-claim, it’s hardly surprising that business leaders are trying to defer to important decisions until after the vote. The problem is that our economy is powered by our ability or willingness to make bold decisions.
The UK services sector is already showing the effects of referendum malaise: the latest Markit/CIPS services Purchasing Managers’ Index (PMI) shows it weakened in February, registering its slowest rate of growth for nearly three years. Activity in the construction sector also slumped to a 10-month low with the PMI falling to 54.2. An ‘unwillingness to commit to new projects ahead of the vote’ was cited as the key reason.
Markit’s chief economist Chris Williamson said: “Survey responses reveal that firms are worried about signs of faltering demand, but boardrooms have also become unsettled by concerns regarding the increased risk of Brexit, financial market volatility and weak economic growth at home and abroad.”
It’s not surprising that corporate fears about a Brexit are coming to the fore. My immediate worry for the economy is that we may get stuck in a sort of paralysis until the referendum is over. But I have another niggling concern: that even after the vote, our indecision fails to be dispelled.
Take 2014’s Scottish referendum, for example. We were told that this was a once-in-a-generation opportunity to vote on Scotland’s future. But the closeness of the final result – 55% to stay in the UK, 44% to go independent – means that the issue is not off the table. Not by a long chalk. Within months, Scottish politicians began to talk about the prospect of a re-run. Now, a decision to leave Europe will almost certainly trigger a new referendum in Scotland.
What if the European vote proves to be a close one? If it’s a vote to leave, will half the nation have to be dragged kicking and screaming out of Europe’s grip? If it’s to stay, how strong a mandate for EU membership will that be? And how long before other political parties pipe up that, if elected, they will have a new referendum at the earliest possible opportunity?
Whatever the final result, whichever way the nation votes, we need a strong, unambiguous decision. Whether we vote to remain in Europe or bid adieu to our continental neighbours, what businesses desperately need is an emphatic yes or no. Because the power of that mandate will give business leaders the confidence that the new world order in which they find themselves is permanent one. They may not like the result, but at least they know it’s sustainable.
None of us really know what the impact of Brexit would be, nor for that matter the repercussions of staying in. But we can all pay testament to the damage caused by indecision and vacillation.
