As companies prepare to compete outside the Single Market, locating in the right part of the UK – surrounded by the best infrastructure, people, ideas and partners – could mean the difference between a good and bad Brexit.
Does Brexit mean the same to businesses in Bradford as to companies in Cornwall? Surely different regions will experience very different Brexits depending on the trade their companies do with the EU, the money they receive in grants and farm subsidies or the proportion of their workforce from continental Europe. Despite that, I would argue having a ‘good’ or ‘bad’ Brexit remains in a region’s own hands and every region in Britain should review their regional strategy in light of Brexit.
If regions follow that advice, we will see an increasingly varied Britain. That means where a company bases itself within the UK could have as much impact on their long-term exposure to Brexit as relocating outside the UK completely.
So far, the impact on companies has been mixed in regional terms. Colleagues across the country say clients are hurting because of higher import prices, but they also report that many of their clients are "flying” (to quote one partner in the north) as the weaker pound boosts exports, draws in tourists, prices out foreign competition and makes his clients' more attractive to foreign buyers.
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Some regions will be more nervous post Brexit, as to how trade with the Continent plays out. A study by think-tank Centre for Cities pointed out that Exeter, Plymouth and Bristol depended on EU markets for between 65% and 70% of their exports. By contrast, Ipswich, Hull and Derby did as little as a quarter of their export business with the EU.
How should regions respond to this? In other countries we see regions compete with each other on price – for example, reducing corporate tax rates and paying tactical subsidies – to attract investors and customers. But just as price wars break out between commercial rivals, ultimately there is only one way to win a competition based on price and the result is not appealing for regions nor the exchequer. Differentiating one’s offer is a more resilient long-term strategy.
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Don’t waste a good crisis
Regions should grab the opportunity of Brexit to accelerate their efforts to differentiate and market themselves: identify where they are strongest, what they are famous for, where they have an edge in terms of workforce, location or infrastructure … and then go out and sell themselves under that banner. Harnessing the profile of new mayors who now govern an increasing number of UK towns and cities is one quick and effective way to start doing that.
This more activist role for local government struck me on a recent visit to Norwich. Council leaders there are easing off on references to their “cathedral city” and are using their proximity to Cambridge to position Norwich as part of the burgeoning ‘Silicon Fen’ cluster. Or take Hull: by linking the technical focus of their university with local offshore wind experts they have created a national hub for this renewable sector (and one of the least geared to EU exports according to the Centre for Cities study). Specialisation is a powerful tool for regions.
For some their strategy will need appropriate investment in infrastructure, skills, academic links and so on. But this is not simply an appeal for more funds from central or local government. It relies just as much on bold decision-making and an imaginative approach to alternative sources of finance and funding. The emergence of East London’s Silicon Roundabout was not primarily a story of money. It involved a group of like-minded start-ups whose clustering together encouraged the free movement of ideas, talent and capital. Perhaps Brexit will stimulate new and varied ways of thinking of public private partnerships.
For Britain’s regional leaders then, the task is for some hard-headed reflection about their strengths and weaknesses as they prepare to enter a more competitive global market. For businesses, the challenge is also to ask themselves some searching questions. They may be rooted to the British Isles because of their customer base or simply through history and inclination. But that doesn’t mean the start and end of a location strategy review. As companies prepare to compete outside the Single Market, locating themselves in the right part of the UK – surrounded by the best infrastructure, people, ideas and partners they can find – could mean the difference between a good Brexit and a bad Brexit.
Brexit: A catalyst for businesses to reset their futures.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK. You can register for the email subscription list of this column and expert views from our Brexit leaders.