With Article 50 now triggered and the formal Brexit process underway, the world’s eyes will remain on Europe for the foreseeable future. Here, Michelle McGrade, Chief Investment Officer of TD Direct Investing, discusses for Finance Monthly the investment opportunities on the horizon and the relevance of the socio-political environment that surrounds businesses.

The UK’s vote to leave the EU last June was likely to catalyse political uncertainty across Europe. This was especially true with a number of Eurozone countries, including the Netherlands, France and Germany, holding elections over the course of 2017. With Donald Trump’s unexpected election victory in the US, concerns around the rise of populist governments gaining power in Europe have been further raised.

The result of Dutch election recently, in which the populist measures proposed by the Party for Freedom (PVV) lost out to the current People’s Party for Freedom and Democracy (VVD) government, was a positive outcome for European markets looking for stability. The risk of a potential exit from the European Union (EU) and the euro, as well as further restrictions on immigration, have all receded.

But, what does this mean for investors?

According to our most recent customer survey, 65% of respondents believe Europe has been wounded by the rise in the populist movement. But when asked whether a populist movement – in this case triggering Article 50 - will have a positive impact on their portfolios, investors were split; 38% were unsure while only 32% thought it would.

While the Dutch result suggests this risk might be over-inflated, the uncertainty will persist until the outcomes of these elections are known.

We need to stop being blinkered by the politics

When the Dutch election vote came through I said publically that instead of focusing on politics, we should probably concern ourselves more with the fundamentals. Ian Ormiston, fund manager of Old Mutual Europe (ex UK) Smaller Companies, agrees. He believes there are reasons to be positive on the outlook for European equities and agrees that we should largely ignore politics. “Investing in European equities is not the same as investing in Europe,” he says. “Next time you are tempted to talk politics, opinion polls, and the vagaries of the US Electoral College system, try restraining yourself, however tempting. No one knows how key political events are going to transpire, just as no one knows what the stock market’s reaction to those events is likely to be. As investors, let’s try to stick to the knitting and focus on company fundamentals.”

The cyclical recovery across Europe is showing signs of gaining momentum. Lead indicators remain positive and there are signs of improving confidence from companies and consumers. Eurozone unemployment is also continuing to fall, supporting the recovery seen by consumers. This is being aided by easier borrowing conditions for both corporates and households, helped by a European banking system which is finally becoming better capitalised and willing to lend. The threat of deflation is also abating, with inflation approaching the European Central Bank’s (ECB) target of 2%.

So, where are the European fund opportunities?

John Bennett, head of European equities at Henderson Global Investors and manager of Henderson European Selected Opportunities, points to a meaningful move away from growth and towards value investing. He is particularly keen on European banks.

“While it is early days, the signs are good that this change in leadership [from growth to value] could be durable,” says Bennett. “Such a shift, should it continue, favours Europe, home to many ‘value’ stocks, and is positive for the kind of stocks and sectors that investors have found easy to avoid for much of the last decade.”

“Our tilt to value accelerated significantly in the second half of 2016,” he continues. “That acceleration was writ large by our move into European banks despite, like many other investors, finding the sector still very easy to dislike. History shows that investing in European banks would have been a spectacularly wrong call from 2008 until recently, but we feel a combination of vastly improved capital ratios and a turning point in interest rate expectations has made the industry once again investable.”

In addition to these funds you could also tap into opportunities in European equities via BlackRock Continental European Income, which seeks to generate income by investing in companies with a strong competitive position and earnings stability, and with sustainable and growing dividends, or Jupiter European Special Situations, which invests in high quality companies whose profits are growing.

For European equities, the strengthening economic backdrop is improving earnings prospects. Following several years of moderate or no growth, expectations are for high single digit earnings growth this year, with further improvement in 2018.

Europe now turns its attention towards France and its upcoming presidential election. Should Marine Le Pen’s Front National win there could be consequences for the EU, but the two-stage electoral system in France could act against her. Nevertheless, investors are likely to remain cautious until the political risk across Europe reduces.

What we’ve learnt from Brexit is that no one knows how key political events are going to turn out, and what the stock markets’ reaction to those events will be. As investors, it is better to stick to what you do know and focus on a long-term investment horizon.

A new survey, sponsored by The Brexit Tracker, has calculated that Brexit planning has already cost UK businesses, £667.2m so far in executive man hours and this figure is set to rise to £813m after Article 50 is triggered.

The survey, conducted in January, polled 168 Board Directors of UK companies with a turnover of £10m - £150m to discover the impact and cost of Brexit planning. The associated costs were a conservative calculation based on current working hours spent on Brexit planning, accounting for one individual per organisation and factoring in that 68% of organisations have at least two staff involved.

Ben Martin, founder of The Brexit Tracker said, “Our research suggests that 40% of firms have already started planning for Brexit and with 70% CEOs and CFOs being tasked with that planning you can see how already it’s becoming an expensive business.”

However, despite anticipated costs, the survey found UK businesses were predominantly positive about Brexit and leaving the EU. While many are in ‘wait and see’ mode almost twice as many respondents are positive about the benefits Brexit has had on their industry sector than are negative (39% v 21%).

37% of respondents felt there would be a positive impact on business following the triggering of Article 50 while 30% thought there would be a negative impact. But optimism rises again to 42% v 34% when considering the impact of leaving the EU in 2019.

But the survey showed that Brexit was having a negative impact on general business planning and investment. Three quarters of organisations stated the level of uncertainty impacted their ability to invest. The biggest area facing one third of organisations is developing new markets (34%) and this is most notable in Construction (58%), Professional Services (47%) and Business Service (45%). Investment in technology and recruitment were the other main areas facing uncertainty.

Ben Martin explains the thinking behind The Brexit Tracker: “Our research highlighted that although76% of respondents understand the general implications of Brexit that falls to 67% when looking at how Brexit impacts their own business. Clearly there is a knowledge gap.

“The Brexit Tracker analyses 390 economic indicators pertinent to the sector and the firm’s particular circumstance. Stakeholders can understand likely implications for their business and compare their views with those of their peers. Our tool enables expensive resource to be smartly invested in strategic planning, not squandered in trying to make sense of a myriad of factors that may or may not be relevant to the business.”

(Source: The Brexit Tracker)

For months, businesses, consumers and authorities in both the UK and the EU have been waiting for the triggering of Article 50, which initiates the Brexit procedure. However, the lack of details due to the mantra "no negotiation without notification," means that uncertainty has likely been the most mulled over word in media right now.

Tomorrow is the due date for the UK to initiate the process, and the impact will be both immediate and long term, with lengthy negotiations to take place on the back of already what seems lengthy planning time. Finance Monthly has this week heard from numerous sources across the UK, from experts and specialists in several sectors, to businesses forecasting the opportunities and risks, on what might be once Article 50 is officially triggered. Here’s Your Thoughts.

Markus Kuger, Senior Economist, Dun & Bradstreet:

Theresa May’s plans to start Britain’s withdrawal process from the EU will set off a series of tough negotiations. The complexity of Brexit poses unique challenges, with overall sentiment and fiscal numbers continuing to paint a mixed picture: although forward-looking indicators are still reasonably strong, they have deteriorated since the start of the year and, simultaneously, inflation has registered its highest reading since Q3 2013. In this vein, it’s far too early to realistically assess the potential political and economic impact of Brexit – a real bone of contention will be the controversial departure bill, which may well see the UK pay in excess of £60 billion to officially leave the EU. With negotiations about future EU-UK trade relations expected to take longer than the two years available, it is likely that an interim agreement will have to be struck, and we do not expect full independence to be secured until the 2020s at the earliest.

The public’s interest will focus on what kind of deal Theresa May can strike with the EU, especially as the President of the European Commission, Jean Claude Juncker, has reinforced his position that the UK will not be able to ‘have their cake and eat it’. The EU still seems to have the upper hand in the upcoming negotiations, but a disorderly Brexit would also hurt the remaining 27 members of the bloc (although not as badly as the UK). From an economic perspective, the UK is actually performing just as well as it has done since before the country voted to leave the EU, but it’s unlikely that this strong growth will continue throughout 2017. Politically, events in Europe over the next few months could have an impact on negotiations; elections in France and Germany, should they unexpectedly go the way of anti-EU parties, will likely destabilise the two powerhouses’ control over the European bloc. For now, the priority is to start developing official plans for the UK’s departure from the EU. Businesses must monitor the uncertain and fluctuating economic situation that is to be expected over the next few years, and mitigate risks as best they can.

Mark Billige, Managing Partner, Simon-Kucher & Partners:

After the referendum, we have already seen a notable impact on prices, with the inflation rate before the vote hovering just above 0% but now nearing 2%, the official target rate of inflation in the UK. More price rises are imminent with Article 50 being triggered.

Research by Simon-Kucher shows that the severity of price increases passed to consumers has been gradually rising since the referendum. This means that as we move closer to the point at which Theresa May looks like she will trigger Article 50 at the end of this month, companies look set to pull the trigger on increasingly significant price hikes.

But businesses need to be careful. For instance, a survey conducted by Simon-Kucher shows that level of concern about price increases resulting from Brexit does vary within the UK, with 97% of Remain voters concerned about price increases, versus 57% of Leave voters. The research also shows that holidays and grocery bills are feared as the most likely culprits to face price increases. Many people, especially those who support Leave, take a dim view of companies attributing price rises to Brexit.

Chris Baker, Manging Director, UK Enterprise, Concur:

I think businesses have been pretty clear right from the outset about the deal they want with the EU once we're officially no longer part of the 'club.' What will be interesting is how corporate behaviour changes over the course of the next couple of years. We already know from reports that many are stockpiling cash rather than investing, but a new development is also emerging. Many of our customers are reviewing their supplier strategy with a view to forming partnerships with UK companies in order to reduce Brexit risk and turbulence from the FX markets.

Such a strategy makes sound business sense, but longer term if the UK withdraws into itself commercially it will be much harder to forge trade agreements with China, India, the US and of course the EU. To get the best deal we have to be seen as a global economic force, not an island. Businesses need tangible incentives that will give them confidence to invest both in the UK and abroad.

Michelle McGrade, Chief Investment Officer, TD Direct Investing:

Rising employment continues to propel the Eurozone region towards 2% growth. Add in inflation and operational gearing, and growth at a company level starts to look interesting. There are some selected good structural growth stories across Europe. No one knows how key political events are going to transpire, and what the stock markets’ reaction to those events, or indeed the effect on the euro, will be. As investors, it is better to stick to what you do know and focus on a long-term investment horizon.

Rob Halliday-Stein, Managing Director & Founder, BullionByPost:

We've got a lot of uncertainty at the moment and when you look at things and people tend to see gold as a good thing to hold during those times and if you look at Brexit, for example, even though it has not actually happened yet, that could still have a big impact as far as business is concerned. Our most profitable times are always during times of uncertainty.

As a business, somewhat sadly, we always tend to do well at times like that. No one really knows how this Brexit is going to play out over the next two years once Theresa May pulls the trigger to trigger article 50. There are a lot of unanswered questions and a long road to go down. We don’t yet know what is going to happen to UK and EU nationals working and living abroad and those from other European countries that are living and working here in the UK. Indeed, as part of our business, we do employ a few EU nationals so the future for them is somewhat uncertain.

And then there’s the bill for leaving the EU and the estimates are that that could come to around £50bn for our share of liabilities. What will happen to the EU laws that we have been bound by for more than 40 years? Are there similar bills going to have to be rushed through parliament? Theresa May is really going to have to tread carefully here to get the best deal for us upon leaving the EU – otherwise this could end up costing the country dearly.

For me balance of payments is a big issue for then UK right now. We need to be selling more goods and services than those that are bought in from elsewhere. The UK’s 2016 international trade statistics released this month show the deficit of Britain’s balance of payments increased by nearly £10 billion, and is currently just short of £40 billion. This is something that simply needs to be addressed when we go it alone.

However, this is all good for business. With all the uncertainty in the world people still know there's a very strong case for holding gold as part of their portfolio. It will, at the very least, keep its value and preserve wealth. It may spike much higher than that at points of crisis and then it tends to bounce back a bit.

Mark O’Halloran, Coffin Mew:

Over the next two years the ‘Great Repeal’ will become as a common a phrase as ‘Brexit’ has been in the last two. But Great Repeal Bill is misleading as the government’s key task will be enacting legislation, not getting rid of it.

The adoption of EU legislation is not going to be a smooth process. It is going to be complicated by an expectation that negotiations between the UK, the EU and its member states won’t reach resolution till near the end of the two years, potentially leading to a mad rush to get laws adopted.

Patent law is a prime example of an area that is going to be of shared concern for many areas of UK industry going forward. The Government still appears eager to move forward with both a unified European patent court and a unified European patent, and there is logic for this. British businesses will want the security of knowing that their patents are protected as widely as possible, without the hassle of having to prepare and file applications in multiple countries.

As it is, it is far more expensive to protect designs through patents in Europe than in the US and the new unified European patent court and a unified European patent is aimed to address this. The price we may need to pay, however, is continued EU political influence through, perhaps, the involvement of the ECJ. Despite Brexiteer assurances, we will not be able to have all our cake and eat every morsel of it.

There is much uncertainty in how the extraordinary challenge of Brexit will be handled; and two years for global events to take unexpected turns. At first, don’t expect all that much to change. Theresa May’s Government will be closely watched and scrutinised over the next two years and their remit will be to simply ensure we have working legislation in place for us officially leaving. It is once this formal process is complete that the fireworks will fly.

Owain Walters, CEO, Frontierpay:

We expect to see some initial volatility or “noise” in the market once Article 50 is triggered at the end of the month, however, there won’t be any significant developments until we learn more about the detail of the negotiations and any deals become clearer. Our advice to businesses is that they take advantage of the remaining two years in which we will have access to the single market to prepare for life outside of the EU. Laying the necessary groundwork to ensure that they have access to international markets and currencies upon our departure is the best way for businesses to ensure that they are successful post-Brexit.

Alex Edwards, Head of the dealing desk, OFX:

When Article 50 is triggered, it will doubtless have an economic impact. But although the currency market is often the first to react to political developments, we’re unlikely to any significant moves on the day itself.

When the Prime Minister first announced that she would trigger Article 50 on 29th March, the pound was quick to fall against the US dollar. In the end, this was only a minor blip in sterling’s recent gains – on the whole, traders have been focusing on positive economic data from the UK, along with rising headline inflation and a hawkish stance from the Bank of England.

Investors know that Article 50 is coming, and to a point, the market has already priced in a lot of the potential negatives that could arise around the coming Brexit negotiations.

In the longer term, the strength or weakness of the pound will largely depend on the progress of EU negotiations, rather than monetary policy. If negotiations are seen to be going well for the UK, then this will undoubtedly be positive for sterling, particularly against the euro. If they are perceived to benefit both the UK and EU, then this will still be favourable for the pound, as it would bring some certainty to the market. After all, it’s traditionally political and economic certainty that’s good for a country’s currency.

Failed negotiations, you won’t be surprised to hear, will not be positive for the pound. Any negotiations will also need to be voted on, certainly on the European side, and possibly in Parliament here. Like any vote, if we know it’s going to be tight, this creates uncertainty – not good for either the pound, or the euro. On the other hand, if the outcome is predictable, then the market reaction will likely be mild when the deal is passed, perhaps even supportive for the pound, as investors buy the fact rather than the rumour.

Overall though, there are still many unanswered questions about what shape these negotiations will take. It’s uncertain, and we know what uncertainty means for a currency. We’re already seeing this affecting exchange rates – the pound has been at historic lows since the Brexit vote, and has been under and close to 1.20 against the US dollar for some time.

When Brexit negotiations begin, clarity should start to be restored. As such, there may be some positive surprises in store for the pound over the next two years – the risk, as they say, could well be to the upside.

Robert Hannah, COO, Grant Thornton UK LLP:

More than nine months after the referendum result, the lion’s share of the government’s and the media’s attention is still being granted to big business brands. However, we know that mid-sized and smaller businesses are the strongest growing sections of the business world and form the backbone of Britain’s economy as significant employers and economic contributors, with strong growth projections.

Brexit should be seen as an opportunity for these businesses to open up to new, more competitive, markets and the catalyst for exploring how we unlock overseas opportunities beyond the EU.

Seeking out areas where good practice is already in place and learning from it, is key to this. A good example is Scotch whisky, a leading UK export enjoyed globally worth £4bn a year. The sector has had an excellent champion in the Scotch Whisky Association, who work hard to ensure fair access across all markets and the industry, and has built an enviable distribution network throughout the globe.

If the British government is serious about getting match fit for the new global economy, they could do a lot worse than sitting down for a dram with Scottish whisky producers to understand how we can get our mid-sized and smaller businesses set up for success.

Rob Douglas, VP of UK and Ireland, Adaptive Insights:

Although the triggering of Article 50 was arguably inevitable it is still likely to cause fluctuation on the global markets and businesses need to be prepared. At the very least, businesses are at risk of the impact of currency fluctuations, but they also face years of negotiations and debates, the outcome of which will have a knock-on effect on finances.

Above all else it is important for finance teams to carve out a degree of stability for their business. The best way to do this is to take an active approach to planning and ensure that they are as agile as possible to respond to wider economic changes. For example, ‘what if’ scenarios that model currency changes can give the finance team and business greater insight into where they may see hikes in costs, which, if not adequately prepared for, could be fatal to a business.

What’s more, finance teams also need to be sure they are considering the entirety of the business. For example, business drivers are not exclusively financial. Non-financial KPIs need to be worked into models if the team is to get an accurate view of the business both now and how it will fair in differing economic environments.

Article 50 undoubtedly spells a volatile time ahead for the UK business community, but successful corporate performance will depend on ensuring the business is as agile as possible. A finance team needs to have its hands on all the business levers, understanding how it can respond to changing market conditions to preserve–and even enhance–the health of the business. Done in the right way, a finance team will cushion its business when times are bad and make it thrive when times are good. It is only with an accurate view of the business, being prepared and predicting possible threats and opportunities, as well as modelling these across the whole enterprise, that a finance team can truly steady the ship in the tumultuous post-Brexit world.

James Roberts, Director, Sanctuary Bathrooms:

As an independent business owner who deals internationally and domestically, we’ve seen rising costs from suppliers since the announcement of the Brexit vote. The rise has been on average around 7%, but as the dollar and euro start to level out, this should hopefully reduce. This has impacted UK consumers, as we’ve unfortunately had to factor this increase into our prices.

One unseen benefit of this upheaval has been an increase in orders from other EU countries, who are taking advantage of the weak pound to grab themselves a bargain.

Frustratingly, we’re still in the dark in regards to the full impact of Brexit, but early indicators are a mixture of positive and negative. It’s difficulty to say with any certainty what post-Brexit Britain will look like as it’s uncharted territory.

Before the referendum last June, many economists produced gloomy forecasts which have since been proved wrong. Consumers' confidence has not suffered, and, by and large, things have gone on as before. Personally, we are quietly confident that our business may benefit from a boost in EU orders in the near future which will sufficiently counter any losses in sales domestically.

Michael Hatchwell, Director, Globalaw and Senior Corporate lawyer, Gordon Dadds:

When the UK Government triggers Article 50 there will be no immediate changes in law or treaties; therefore a trigger of Article 50 will not in itself have any economic effect. Markets may experience some movement, but there will be no immediate effects as the United Kingdom remains part of the EU until it leaves.

Once triggered, the UK will have two years to agree not only the exit terms but also the principles for future relations between the EU and the UK. When one considers the vast array of issues to be thought through and covered, bearing in mind that we have a history of some 40 years of integration, and that major issues such as financial passporting and access rules for UK and EU citizens (both ways) are but the tip of a huge iceberg, it is not surprising that many are of the view that there is not much chance of negotiations concluding in two years.

Two years from the trigger of Article 50 the EU treaties will cease to apply, unless that period is extended by the European Council with the agreement of all 27 other member states.

If no Free Trade Agreement (FTA) is agreed and two years expire without extension, because the UK is a member of the World Trade Organisation (WTO), the EU will treat the UK as it does other WTO members, such as Brazil, Russia or the USA. The same EU tariffs will have to apply to the UK because it will be illegal, absent an FTA, not to do so.

Given the volume of UK/EU commerce, this fallback position will not be welcomed by either side.

Ultimately, because nothing happens immediately and because nobody knows what the outcome of negotiations will be as no country has previously triggered Article 50, the only certainty over the coming 2-3 years is that there will be uncertainty.

This is problematic for those making key investment decisions, as well as in terms of important choices that need to be taken by individuals and companies whose lives and business are entirely intertwined with the EU.

So, can big business afford to wait? Absent some clear indications on key issues, it is likely that businesses will need to anticipate the prospect of trade between the UK and the EU not remaining as easy as it is now. If moving certain functions to another EU location now resolves that issue, then why would such a step not be taken? Of course it may prove to be an unnecessary step, but the risk of not acting may not be acceptable. The decision will of course depend upon a company’s particular trade and issues.

Further, companies are aware that it is unlikely the 27 other member states will make negotiations easy for the UK as they do not wish to encourage any other countries to leave. They may also want to attract as much business as they can from the UK to their own states and play on the uncertainty that will exist.

As regards rushing into new treaties with non-EU countries such as the USA and China, the EU has made is quite clear the UK cannot do so until it has left the EU, creating a potentially longer period of uncertainty before treaties with our key trading nations can be agreed.

It is therefore quite likely that if Brexit does prove to be of benefit to the long-term interests of the UK, it is unlikely that the short-term unavoidable and inevitable uncertainty affecting so many key critical issues will not have a real and negative short-term impact on the UK economy. Put another way, it would be quite surprising if it did not.

The government and the Bank of England will have to act carefully and decisively to ensure that they make the UK a seriously attractive place to do business to counteract the uncertainty that will exist.

Gary McIndoe, Latitude Law:

When assessing a business's needs from an immigration perspective, Brexit creates the potential to incur real financial burden. Changes to existing practices need to be identified and managed as soon as possible, both to minimise costs and to streamline processes (and perhaps even achieve financial savings). As a starting point, business should assess their exposure to the impact of Brexit - some businesses will employ a far higher proportion of migrant workers than others, particularly if in a sector such as construction, hospitality or manufacturing. Review your workforce now and determine what proportion of current employees might be affected. Your business can take steps now to calculate and secure staff retention.

The next step should be to limit the immediate damage - we do not know whether the UK government will guarantee the rights of EU workers already in the UK, but we can be reasonably confident that some sort of provision will be made for those who already have employment, particularly if long-term. Speak to your existing workforce about their feelings towards Brexit, they might need guidance on securing their position. Employers can run workshops for staff members to discuss their eligibility for securing confirmation of residence rights. While this can incur an initial financial outlay, staff retention rates may benefit from a proactive approach. Many EU nationals do not hold a UK-issued residence card, but it would be a good idea to apply for one now. In some cases, a permanent right of residence can be confirmed immediately, but for those who do not satisfy those requirements, a time-limited card from the UK government is likely to give the best protection and offer a level of reassurance for employer and employee alike.

Once you have secured your current workforce, you should consider future recruitment needs, including where your staff are currently recruited from and how might the end of ‘free movement’ affect your hiring strategy. Depending on the scheme on which the government chooses for future EU migration, large-scale recruitment from specific countries may become costlier and more complicated. Familiarise yourself with the schemes applicable to non-EU migrants; formal sponsorship might never be a requirement for EU nationals, but knowledge of more flexible measures both past (such as the Seasonal Agricultural Workers Scheme) and present (e.g. Tier 5 Temporary Workers) could be of use to your business as Brexit negotiations continue.

Finally, you need to prepare your HR team. This will depend on the measures introduced when Brexit takes effect, but your HR team’s processes need to be checked to avoid illegal working may need to change. Consider reviewing your personnel files now to update ID documents and best protect yourself from illegal working penalties in years to come. Future document requirements for EU nationals are not yet known, but reintroducing document checks (or re-familiarising your team with the requirements) at an early stage might help you to transition to a more robust system required from 2019, and save costly penalties in future.

Declan Harrington, Financial Advisor, Savage Silk:

We expect that the economic and social effects of Brexit won’t become completely clear for at least six years. During this period of adjustment, we believe that the majority of companies and even individuals will see very few significant changes in their circumstances.

The only certainty is that fruitful financial opportunities will still exist once Article 50 has been triggered, and businesses should not use Brexit as an excuse to shy away from jumping on them. We are already working with companies and individuals to help them identify these opportunities and take advantage of very benign investment and credit conditions.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

As Parliament has now confirmed the implementation of Article 50 and the notification that the UK will commence negotiations to leave the EU tomorrow, the 29^th March, FDR Law’s Commercial Partner John King, considers how commercial contracts could be affected by Brexit.

The Prime Minister has now announced the formal Brexit negotiation process will now be triggered Wednesday 29^th March, following which the UK will then have two years to negotiate an exit deal. This commencement of the exit provisions has now been authorised by Parliament and it is expected that the Prime Minister will make a speech next Wednesday in the House of Commons to set out her aims, shortly after invoking Article 50.  For the time being, EU law continues to apply until the exit negotiations are finalised and it has been suggested that the task of reviewing and, where appropriate, repealing or amending legislation could take up to 10 years.

Both in the run up to and following Brexit, Britain will clearly continue to do business with the rest of the world, so it is important to understand what ‘rules’ are likely to apply to commercial contracts which underpin their business relationships, particularly with EU companies. So to what extent will developments during the negotiation period affect some of the commercial and legal areas?

On the face of it, many commercial contracts would seem to be neutral as to whether the UK left or remained in the EU. They are generally less heavily regulated than many other areas of law, and, as the name suggests, tend to be based on the commercial bargain between the parties. But what if that commercial bargain is in itself significantly affected by Brexit? Now is a good time to start identifying any potential risk areas in your commercial contracts. These could include increased trade barriers, currency fluctuations, the territorial scope of your agreements, and changes in law.

Existing contracts

The UK leaving the EU may well affect the operation of existing contracts, possibly in a manner that the parties had not foreseen or planned for at the time of entering into the contract. For example, if the operation of the contract was wholly or largely dependent on the ongoing operation of some particular EU legislation it is possible that the contract could be frustrated (i.e. terminated) or the force majeure provisions could be triggered at the time of Brexit (or indeed possibly before when the terms of Brexit become clearer).

Short term contracts

Short term contracts are less likely to be affected by the UK leaving the EU due to the two year negotiating window that will start once Article 50 is invoked. This negotiating period should give both parties time to consider how the terms of Brexit might affect their longer term contractual arrangements and give rise to re-negotiation.

New contracts

Before entering into any new contracts with corporates in other EU Member States, careful consideration should be given to these areas if the contract is likely to continue post Brexit, and you should seek to provide provisions in the contract that might include:

• Either expressly including or excluding the UK leaving the EU in or from any force majeure provision
• Giving the parties termination rights when the UK leaves the EU
• Providing for/referring to an alternative mechanism which will apply once the UK leaves the EU

Overseas contracts

The greatest economic impact is being felt by businesses bringing in materials from abroad. Both the annual and monthly rate of producer price inflation increased in February 2017. Output prices rose 3.5% on the year to January 2017, which is the seventh consecutive period of annual price increases and the highest they have been since December 2011. Prices for materials and fuels paid by UK manufacturers for processing (input prices) rose 19.1% on the year, a slight decrease from the year to January 2017 but the second fastest rate of annual growth since September 2008*. The expectation is that in the event that Brexit means that the UK ends up trading with Europe under WTO (World Trade Organisation) rules, anticipated EU import tariffs would add approximately 10% to the price of UK goods sold to the EU. Any party to a contract that is no longer economically viable will need to review their contractual (and common law) termination rights to see how quickly they can bring the contract to an end or whether the contract offers opportunities to re-negotiation the commercial terms.

In these circumstances force majeure and material adverse change provisions are relevant. Whether they are triggered will depend on the exact drafting of the contract and the application of the rules of contract interpretation. Currently, the market consensus seems to be that it is relatively unlikely that force majeure clauses will be triggered in the absence of wording specifically contemplating Brexit. It may be easier to argue that financial consequences following on from Brexit constitutes a material adverse change but not every contract includes a material adverse change provision.

Next steps

If any of your key contracts are likely to be affected by Brexit, you could consider seeking to negotiate amendments to terms that are materially affected. It is also worth considering whether the contract contains any contractual remedies that could be triggered by Brexit.

Trade deals with the remaining EU states are highly likely to take several years longer than that. In the meantime, the ramifications of Brexit will hopefully become clearer so that businesses are able to confidently deal with any contractual issues that it may bring.

*ONS UK producer price inflation statistical bulletin: Feb 2017

Movinga, Europe’s leading online removals platform, has released a study revealing the cities in which London professionals displaced by Brexit would feel happiest. Dublin is the most favourable city for bankers, based on the average high-end rent prices, language spoken, cuisine, luxury stores and bars, pushing the cities of Frankfurt and Paris unexpectedly far down the list. Startup employees, on the other hand, should try to convince their boss to consider Berlin due to the low income tax rate, average rent, number of co-working spaces, travel costs and the widespread use of English.

There is much uncertainty surrounding the future of London’s banking sector and it is widely reported that banks, British and foreign ones, are looking to move a large part of their workforce to cities such as Frankfurt and Paris. Movinga’s new study shows, however, that the banks might be overlooking the needs of their employees, who are likely to want to continue enjoying an excellent choice of restaurant and bar options, while wanting to keep the costs of monthly essentials, ranging from dry and house cleaning to gym membership, to a minimum. According to the study, Dublin ranks first and is followed by Amsterdam in second and Valletta in third, while Frankfurt trails far behind in sixth place and Paris in ninth.

What is important for bankers is often unaffordable for startup employees. Their requirements are directed more towards travel costs, combo lunches, shared rent prices as well as the price of beers instead of expensive cocktails. Rather than an office in a high rise, they also prefer to have an array of co-working spaces to choose from. The study confirms what many already believe: Berlin is the up and coming startup capital of Europe, closely followed by the cities of Warsaw and Budapest, in second and third place respectively.

“Everyone talks about Paris and Frankfurt as the new financial centres of Europe after Brexit,” said Finn Hänsel, Managing Director at Movinga. “But other cities like Dublin, Valletta, Luxembourg and Amsterdam may actually be better equipped to make these workers feel happy and at home. Individuals and businesses alike should consider the unique factors important to their relocation before planning their move.”

City Banker Index: Results

The results reveal that Dublin is the most desirable city for London bankers to relocate to, scoring high for proximity (70 minute flight), English language comprehension (100%), and more affordable high end rent prices (£1,669.08).

Milan was found to be the least desirable city for London bankers to relocate to due to the expensive high end rent (£2,461.00), the long distance from home (130 minutes), expensive flight tickets (£180.78), and low English comprehension (34%).

*In total, the cities were ranked based on 12 factors, you can access them all by visiting the results page.

Other findings in the city banker index include:

• Valletta, Malta has the lowest maximum income tax rate at 35%.
• Dublin and Amsterdam have the highest maximum income tax rate at 52%.

• Brussels has the most affordable high end rent prices at an average monthly cost of £1,283.56
• Paris has the most expensive high end rent prices at an average monthly cost of £2,841.69.
• The most affordable cocktail on average can be found in Valletta (£4.61) and the most expensive in Paris (£10.14).

• Paris had the most Burberry stores (8), followed by Madrid (4) and Milan (3).
• Paris has the most Michelin starred restaurants (82), followed by Brussels (19) and Milan (17).

Startup Cities Ranking: Results

The results reveal that Berlin is the most desirable city for startup employees to relocate to, scoring high for proximity (115 minute flight), English comprehension (56%), and shared rent prices (£393.47). The city ranks second for availability of capital (9.90) and number of coworking spaces (93), second only to Paris. However, the relative affordability of living in Berlin compared to Paris makes the city far more suitable for startup employees.

Copenhagen was found to be the least desirable city for startup employees to relocate to due to the very expensive shared rent (£957.60), low access to capital (3.62), and the high price of a 0.5L beer (£5.11).

*In total, the cities were ranked based on 12 factors, you can access them all by visiting the results page.

Other findings in the best cities for startup employees include:

• Budapest has the lowest income tax rate of 25%.
• Copenhagen has the highest income tax rate at 43.42%.

• Unsurprisingly, Dublin has the highest English comprehension at 100%. This is closely followed by Amsterdam at 90%, making Amsterdam the non-native English speaking city with highest level of English.
• Budapest has the lowest English comprehension at 20%.

• Paris is ranked with the highest access to capital at 10.00.
• Bratislava is ranked as having the lowest access to capital at 0.00.

• Paris has the highest number of co-working spaces (148).
• Brno has the least number of co-working spaces (9).

• Bratislava has the most affordable shared rent (£195.15).
• Copenhagen has the highest shared rent (£957.60).

• Brno has the most affordable monthly travel costs (£17.19).
• Dublin has the most expensive monthly travel costs (£103.07). Both are still more affordable than London (£122.27).

(Source: Movinga)

The latest House of Lords Brexit report focuses on trade in non-financial services and concludes that a comprehensive Free Trade Agreement (FTA) with the EU is needed. To enable UK companies to continue to operate within the EU, without serious non-tariff barriers, this would need to include a range of complex mutual provisions.

In the absence of Single Market membership it will be much harder to provide for liberalised trade in services than trade in goods.

A 'no deal’ scenario, or a UK-EU trade deal which gave no special consideration to UK non-financial services, would risk serious harm to sectors such as professional business, digital, broadcasting, aviation, and travel services.

In aviation and broadcasting services, WTO rules do not provide for trade with the EU at all. Instead, UK firms would have to rely on outdated and restrictive agreements, so there is no adequate ‘fall-back’ position in the event that no deal is reached. Businesses could be forced either to re-structure or relocate their operations to the EU27.

The Government has also under-estimated the reliance of the services sector on the free movement of people. In forthcoming immigration legislation, the Government must ensure that it retains sufficient room for manoeuvre to negotiate an agreement on this key issue.

These are among the conclusions of the report, Brexit: trade in non-financial services, published today by the House of Lords EU Internal Market Sub-Committee.

Commenting on the report, Lord Whitty, Chairman of the EU Internal Market Sub-Committee, said: “The UK is the second largest exporter of services in the world and the EU receives 39% of the UK's non-financial service exports. This trade is critical to the UK's economy as it creates employment and supports goods exports - we can’t afford to lose that.

“To protect the UK’s status as a global leader of trade in services, the Government will need to secure the most comprehensive FTA that has ever been agreed with the EU. Walking away from negotiations without a deal would badly damage UK plc, particularly in sectors such as aviation and broadcasting which have no WTO rules to fall back on.

“Given the consequences of a 'no deal' scenario and the length of time agreeing an FTA will take, the Government must prioritise securing a transitional trading arrangement with the EU. This would operate as we leave the EU in 2019 until a full comprehensive FTA with the EU can be concluded. This re-iterates the recommendation we made in our report, Brexit: the options for trade, published in December 2016.”

The Committee concluded that, in negotiating a UK-EU FTA, the Government should seek to secure market access and specific reciprocal arrangements in a number of areas. The following are examples:

• Professional business services
  A FTA should include significant provisions surrounding the mutual recognition of professional qualifications and regulatory structures. It should also include rights of establishment for all types of UK service providers, particularly legal services, in the EU and vice versa.
• Data protection standards
  The UK should aim to secure an adequacy decision from the European Commission, which recognises that the UK has adequate data protection standards, in order to maintain the free flow of data. This is particularly important for digital service providers.
• Telecommunications
  To ensure UK consumers do not suffer increased prices, a UK-EU FTA should include provisions extending the abolition of roaming charges in the UK beyond 2019.
• Broadcasting licences
  Broadcasting licences from Ofcom should continue to be recognised in the EU.
• Intellectual property
  Strong protections should be afforded to intellectual property rights across the creative services sector, such as for registered and unregistered designs.
• Aviation
  UK airlines should be able to fly to any point within the EU and provide intra-EU services, either through full voting membership of the European Common Aviation Area (ECAA), or by means of a comprehensive UK-EU air services agreement. This will allow UK airlines to continue to offer the routes they fly today.

The continued movement of workers and service providers in both directions is seen by the UK’s booming services sectors as necessary to support growth.

In a ‘no deal’ scenario, WTO rules would not sufficiently facilitate the cross-border movement of people nor would they ensure the free flow of data. Rules on market access also differ between EU Member States - increasing the regulatory complexity for UK firms.

The Government must narrow down uncertainty so the UK’s services sector can prepare themselves to survive and flourish post Brexit.

(Source: House of Lords)

In a keynote speech to the American Chambers of Commerce, in Brussels last week, Fiona Dawson (Global President of Mars Food) warned that failure to reach a new UK-EU free trade agreement for food would threaten jobs and lead to higher consumer prices.

Noting that protectionist trends are threatening to undermine global trade and make the world less connected, she noted that the future relationship between Britain and the European Union is a critical test as to what future will unfold. Specifically she:

• highlighted how a return to trade barriers would undermine integrated supply chains, which are vital in the large food sector;
• warned that the higher business costs arising from such trade barriers would ultimately flow through to consumers in higher prices and could threaten jobs;
• cautioned that regulatory divergence could undermine future UK-EU trade, and should be avoided;

Jobs and Consumers Must Come First

• urged all parties to the Brexit negotiations to focus on the mutual benefits that close UK-EU economic ties provide; and
• emphasised that politicians must put workers and consumers at the forefront of Brexit negotiations.

Key extracts published pre-speech:

"Brexit clearly poses some problems, but the fact is Britain has decided to leave the EU and the task now is to look forward and ensure that the decisions taken from this point forward achieve the most positive outcome for all concerned."

"The absence of hard borders with all their attendant tariff, customs and non-tariff barriers allows for this integrated supply chain, which helps to keep costs down. The return of those barriers would create higher costs which would threaten that supply chain and the jobs that come with it."

"If Britain ends up trading with the EU on the basis of WTO rules, 'Most Favoured Nation' rates would come into force. In the area of confectionery that alone would mean tariffs of around 30%. For animal products, it would be 20%; for cereals over 15%; and for fish and fruit over 10%. Significant new tariffs would also apply outside the food sector, notably in the area of clothing and textiles. Unfortunately there is no way that those costs could be absorbed without flowing through to consumers in the form of higher prices."

"It is a fact that Europe after Brexit will remain a critical market for UK exports and likewise the UK will remain an important market for goods produced and manufactured in other European states. There can be no economic advantage either side restricting trade with a large market situated on its doorstep. In simple terms, if the UK and the EU fail to agree on a new preferential deal, it will be to the detriment of all."

"Reaching an agreement will require compromise and an appreciation of the economic interdependency between the UK and EU. It requires an acceptance of the benefits that common regulatory standards and the movement of labour can bring, and an understanding that the imposition of significant trade barriers would ultimately hurt everyone and undermine, rather than strengthen, European unity."

"Other member states should remember this is not about 'punishing' Britain for her decision to withdraw but rather about finding the best solution for European and UK workers and consumers. That consideration must come first as we build the future."

(Source: Mars, Incorporated)

Despite some positive economic data in the run up to today’s Budget, the Chancellor has reinforced his steady approach while making some small but significant pro-business adjustments, according to accountancy firm, Menzies LLP.

Business rates

The Chancellor has announced a £600 a year cap on business rates for smaller retailers that stand to lose the small business rate relief. Local authorities are also being given a £300 million pot to support local business.

“The Chancellor has acknowledged that the business rate systems needs fundamental reform and has promised to address this in time. However, in the short term, this cap is not enough and will only deliver limited savings for SME businesses. This will disappoint those expecting big rates increases.”

Self-employment

In the interests of ‘fairness’, the Chancellor has opted to increase National Insurance Contribution rates payable by self-employed workers to 11% by April 2019.

“Care needs to be taken to ensure that self-employed workers aren’t unduly disadvantaged. For this reason, the consultation announced to take place this summer is welcome. In particular, employers will also need to be reassured that they will still have access to this valuable and flexible employment pool.”

Tax-free dividends

The Chancellor has announced plans for the tax-free dividends allowance to reduce from £5,000 to £2,000 in April 2018.

“Before 2016, basic rate tax payers paid no tax at all on dividend payments. Since then, a tax liability has been introduced in stages; first with an exemption on the first £5,000. Now this exemption has been reduced to £2,000, which suggests it could even be removed altogether in time.

“This is a stealth tax on basic rate tax payers. It will also hit employees of companies that encourage wider share ownership and make it harder for employers to create meaningful incentives.”

Brexit negotiations

The Chancellor stopped short of doing anything further on Corporation Tax, which is planned to decrease to 17% by 2020.

“Corporation tax was mentioned several times in the Chancellor’s Statement and this is probably because the government is considering using it as part of Brexit negotiations. Further measures to reduce the administrative burden of R&D tax relief could also be used in this way.”

Apprenticeships and technology training

The Chancellor is intending to go ahead with the introduction of the Apprenticeship Levy in April 2018 in its current form. He also announced the introduction of T-Levels; new, skills-focused qualifications to be attained through the further education system.

“The introduction of T-Levels is good news but it will be some time before any benefit is felt by employers. It means that 13,000 qualifications will be replaced by just 15 and this will certainly bring greater focus, which will help employers to understand and recognise these new qualifications.”

(Source: Menzies LLP) 

Despite finishing 2016 reasonably strongly, the outlook is bleak as the weak pound continues to push up inflation. The UK risk outlook is expected to deteriorate still further from the two downgrades made since the EU referendum, and although uncertainty looms, the immediate impact of the vote has already taken shape. But what about its impact in the long term?

To answer the question about what Britain’s industries, markets, and sectors beyond financial services will be affected in the long run, Finance Monthly has heard ‘Your Thoughts’, and formulated a rundown of your expert opinions on what to expect months, even years from now.

Charles Fletcher, Head of Analysis, Cogress:

We’ve now entered the month Theresa May pledged to trigger Article 50 and initiate the UK’s exit from the European Union (EU). This means it’s time to critically assess the long-term impact of Brexit on the UK’s property market. The shocking result of the 2016 June referendum introduced a greater degree of uncertainty to the UK economy and property market. The weakened sterling and rising consumer inflation combined with the higher stamp duty tax has meant buyers, investors, and developers are exercising more caution.

Over the next few years, weaker economic growth and increasing pressure on spending power will undoubtedly dampen some housing demand and consequently, lower house price growth rates. It’s hard to predict what the long-term effects of Brexit without knowing the kind of trade deal we secure with the EU. However, that’s not say there aren’t already signs giving us an indication of what the future of the property market will look like. In fact, the latest Halifax House Price Index showed just how resilient UK property prices have been in the face of multiple tax changes and the looming Brexit. There’s good reason to be cautiously optimistic about what the state of the property market ten years on from Brexit.

Firstly, low levels of supply will continue to buoy housing prices and stoke buyer demand across the UK. People looking for better yields and investments will look for new locations as business slows in central London. This means we’ll see greater interest in areas & cities outside inner London like Oxford, Cambridge, Manchester, and Bristol. Compounding this is the vulnerable, depreciating pound that has made the exchange rate on UK property very favourable for foreign buyers in China and the Middle East. Even if domestic and EU buyers remain indecisive about whether to dive into the property market, many other foreign buyers see central London and other UK cities as stable property assets in the long-term.

We have also heard overblown fears over the number of banking and business jobs that the country will lose when we exit the EU. The UK remains one of the top three cities to invest in (behind the US and China), partly attributed to London’s global position as a leading business and cultural hub. While Brexit may have some influence, there is no evidence to suggest that London’s position is likely to change in any dramatic fashion over the next ten years. As the indicators for our nation’s economy continue to be strong, we will see the same in the property market.

While 2016 made clear the prediction game is never certain, the strong fundamentals of the UK’s property market will help it navigate the short-term volatility Brexit will bring to our economy. Meaning Brexit is actually an opportunity for buyers & investors willing to take the long-term view on a market that has historically been the nation’s most resilient in times of turbulence.

Jim Prior, CEO, The Partners:

Brexit has not yet happened and its terms are currently completely unknown so it’s impossible to predict how long its effects will last. What we may be able to predict, however, is the effect of the period of post-referendum, pre-Brexit limbo that we are in and likely to remain in for some years.

On that, although there are good arguments to the contrary, I am choosing to take an optimistic view. I predict that in the next few years, British businesses will act with caution but will find themselves periodically surprised by the resilience of the economy and the enthusiasm of the British consumer and, in that light, will be sufficiently reassured to invest more then they currently expect to and will find growth and profit ahead of forecast.

Beyond that, as elections take place across Europe and the Donald continues to tear up the US rule book, Britain may find itself in the ironic position of enjoying a period of greater certainty than other major nations because our decision is made and our government is stable – thanks to Jeremy Corbyn’s counter-productive efforts there’s virtually no chance of a change of government here – whereas theirs are anything but. That could be good for inward investment in the short and medium term even if longer-term doubts remain.

And the long-term is by no means guaranteed to be bad: If Britain can indeed prosper calmly through the next couple of years while other economies thrash around in the political sea, we may then find that our negotiating position strengthens, and the deals we strike might be better than we initially thought. I still hate the idea of Brexit at an ideological level but, in support of democracy and national self-interest, I am looking positively ahead.

Markus Kuger, Senior Economist, Dun & Bradstreet:

A post-Brexit world is not something that is easy to predict. Currently, Pound Sterling fluctuations, inflation surges and political uncertainty are all pieces of a jigsaw that are very difficult to piece together. The consensus of an uncertain picture is therefore quite bleak, but it’s important for businesses to remain calm in this period of transition.

However, despite business’ uncertainty in a post-Brexit era, there has been cause for optimism. Global mergers and acquisitions haven’t slowed (the recent news that Sky PLC has agreed to a £18.5bn takeover by 21^st Century Fox supports the claim that businesses are willing to continue in the same vein) and there has been a surge in manufacturing exports since the vote to leave the EU. However, the outlook has been gradually deteriorating since the start of the year; sales figures in the retail sector fell in December and January, while Purchasing Managers’ Indices in the manufacturing and services sectors have eased, yet still stand comfortably in growth territory.

Regardless of this, the full ripple effect of Britain’s exit from the EU has not yet been felt for one clear reason; Britain hasn’t actually left yet. But what happens after could shape the future of the country.

From a trade perspective, tariff-free access to the EU’s common market could be impacted if talks break down about a free trade agreement and World Trade Organisation (WTO) trading rules are implemented instead. This change in tariff policy could cause some challenges for UK companies involved in sourcing from the continent (as production costs would go up) or selling to it (as companies would need to increase sales prices to cover the tariffs). Positively, Dun & Bradstreet’s baseline scenario still expects trade across the Channel to be carried out tariff free once Brexit is completed.

The true financial landscape will likely not become clear until 2019, once the UK has fully exited the European Union. Financial institutions will need to take stock and react accordingly to the swaying of the financial markets which will no doubt prove problematic to begin with. Over the short run, it seems likely that the government would try to counterbalance the negative economic impact of a hard Brexit by increased spending (in order to make its policy a success and maintain public support). Over the long run however, public services (including schooling and healthcare) might have to be scaled back even further in order to reduce the excessive government deficit to more sustainable levels.

Depending on what sort of deal is struck between London and EU, it is impossible to say when the country might return to ‘normality’ again. Businesses must, however, remain calm and not panic. After the implementation of Article 50, businesses must remain cautious until the pieces of the Brexit jigsaw are slowly put together again – a process that we expect to begin after the German elections in September 2017.

Jonquil Lowe, Senior Lecturer in Economics and Personal Finance, The Open University:

Most economic forecasters are united in thinking that Brexit will make the UK worse off in the long run than it would have been staying in Europe. The reasoning tends to be that European competition has enabled the UK to specialise in what it’s good at – for example, financial services – boosting productivity, wage rates and national income. Also, the UK has benefited from foreign firms locating here as a gateway to European markets. Brexit is expected to unwind these benefits and, for now, there is huge uncertainty over what trading arrangements might replace our membership of the European club.

However, even if the nation as a whole is worse off, the impact on households is likely to be uneven. Trying to predict winners and losers is like looking into a muddy crystal ball, because it will be impossible to separate pure Brexit effects from policy responses. Crucial for households is what happens to inflation and interest rates.

Inflation is already on the rise due to a sharp fall in the pound (currently around 12% lower than its pre-Brexit-vote level ^[1]). This reflects reduced confidence in the UK’s economic future and pushes up the price of imported foodstuffs, oil, clothes and all the other foreign goods and services we love. Wages are failing to keep up, so household incomes are expected to be squeezed. If Brexit does reduce productivity, then depressed wages could persist for a long time.

Inflation is sometimes called a hidden tax because it erodes the value of fixed amounts of savings and debts, so tends to benefit borrowers but is bad for cash savers. The impact could be dampened if interest rates were to rise, but, so far, the Bank of England has suggested that it will not try to rein in inflation by raising interest rates because this could tend to depress economic activity and cause unemployment. However, loose monetary policy tends to push up asset prices, so households with property and equities may be winners.

Over time, the biggest Brexit effect may be shifts in employment with some households facing job loss, while at the same time new job opportunities open up. For example, the financial services sector may shrink and foreign car manufacturers may shift production elsewhere. Meanwhile, jobs with exporting firms could mushroom, since the lower pound makes the foreign price of exports more competitive. Households that are likely to benefit most are those who are willing to be flexible and go wherever the Brexit tide takes them.

[1] http://www.bankofengland.co.uk/boeapps/iadb/newintermed.asp

Howard Bentwood, Founder, Cedar:

As Brexit negotiations drag on despite the rapid approach of the ‘deadline’ to trigger Article 50, the financial world remains rife with uncertainty. Whilst news that the UK economy grew 0.7% in the fourth quarter of 2016 has been attributed by some to a ‘Brexit Bounce’, it is by no means the whole story. This better than expected economic growth has been associated with a rise in household consumption and manufacturing, with services and construction also ending the year well. However, it is worth noting that over the same period, investment was down 0.9% on the previous year and trade remained largely unchanged.

The next few months are sure to see further developments and unexpected economic revelations, as companies trade under changeable conditions. In the run up to the Brexit vote, Cedar saw many clients understandably adopting a more cautious position on hiring; many have taken an interim approach, by recruiting senior support staff on a flexible basis rather than committing to permanent headcount. Amid the turbulence of the current political and economic environment there is arguably an even greater need for top-tier expertise on the board to steer businesses through the uncertain waters. To this end, we have seen a rise in demand for interim Finance Directors, CFOs and CPOs in the last few months. Small and middle-sized companies in particular can benefit from an experienced interim practitioner who can bring their commercial acumen and insight to the table at a critical time.

In discussions with clients and staff, I often hear people wondering when things will ‘return to normal’; I believe that over time the world of finance will simply adapt to a ‘new normal’. Forward-thinking companies can be instrumental in shaping this future through the creation of their own ‘Department for Brexit’, tasked specifically with adjusting their strategy to match the new risks and opportunities faced by Britain as it exits the European Union.

Martin Campbell, Managing Director, Ormsby Street:

Trying to predict when things will be ‘normal’ again post-Brexit is nigh-on impossible. The business landscape will change forever and it is hard to see when things will go back to how they were. I suspect we will look back regretfully at our decision to leave the EU, especially given the Prime Minister now seems set on a hard Brexit. Leaving the EU will have many long-term repercussions, culturally, politically and of course economically. Europe is a key market for many UK businesses, with 96% of British SMEs who export, exporting into Europe. Being unable to trade so easily will inevitably have an impact that could last for years and years.

The uncertainty facing the business environment at the moment is very difficult and is certainly causing challenges in my business where we work with SMEs and large banks - both are playing a ‘wait and see’ game and avoiding long term commitments. But recent developments revealed in a series of interview with City of London business leaders has shown the real fear that the loss of banking jobs to EU countries could threaten financial stability across the continent. The immediate loss of a few thousand jobs is in itself not necessarily a disaster, but there could be a major knock-on effect in terms of financial stability if common regulation is not agreed with the remaining EU members.

The movement of labour across the EU has also been a real positive and there are many UK businesses who rely on the availability of a workforce with diverse skills from across the EU to grow their businesses successfully in the UK. Ormsby Street for example, now employs 12 people, three of whom are from other EU countries. Without this access to talent, future growth could come under threat and there are serious questions about how UK business can replace that talent in the long-term.

Shilen Patel, Co-Founder, Independents United:

As we head for Brexit the future of the country’s economy is naturally being called to question. But with uncertainty comes the opportunity for change and what better time for the UK to invest in its community of emerging entrepreneurial talent and product innovation?

Yes - the glamorous tech sector is in the middle of a funding frenzy, with over £6.7 billion invested into UK tech firms in 2016, but what about the country’s food and drinks sector that’s worth around a staggering £100 billion and represents manufacturing’s most profitable sector?

The fact is, as we head for Brexit, we’re going to need to stand on our own two feet and backing the full spectrum of our entrepreneurial talent will become a necessity. It will no longer be enough to invest in just the tech sector. We’re not Silicon Valley and we shouldn’t try to be. Britain’s heritage lies in product manufacturing – we’re really good at it. After all, the UK is the birthplace of the Industrial Revolution.

In the long-term, Britain’s food and beverage sector could be the lynchpin of a robust economy for a breakaway UK. Broadening our horizons to look at more than just tech start-ups will give our economy the chance to not only survive, but thrive. It's imperative if we want to boost our economy and stave off competition from abroad that we invest in our grassroots companies both inside and outside tech.

As we exit the bloc we need to give credence to our manufacturing sector. Last year alone, 16,000 new food and drinks products launched, which makes investing in FMCG something of a no-brainer. Our expertise as a country sits in the realm of making things. Food, drink, beauty, health, cosmetics and wellness – manufacturing is our heartland and where we face the least outside competition.

It’s not to say that we shouldn’t invest in tech, but rather that we shouldn’t put all our eggs in one basket if we want the post-Brexit economy to flourish over the next decade.

Mark Palethorpe, CFO, Cox Powertrain:

As a small innovative British engineering business, we’re watching the outcomes of Brexit closely. The EU’s Horizon 2020 programme currently provides £2.2bn of funding for universities, research groups and businesses taking on high-tech engineering challenges. That’s a large sum that the UK Government will need to find if the UK’s innovators are going to maintain their efforts. We are encouraged by the UK Government’s stated industrial strategy of getting funding to the small disruptive technology businesses that will be the future growth engine for the UK. We’re keen to see that materialise in terms of funding for SMEs not just for the big corporations with lobby power.

Cox Powertrain is working on a ground breaking new engine and relies on the highest quality talent. Like many British businesses, our team is international, driven by a need for the best quality people available. Post-Brexit, we hope any new visa processes remain straightforward, allowing us to continue to draw on the best possible talent.

On a positive note, the weakening pound will make our engine cheaper to purchase, once available, to overseas customers. Also, a move away from the EU could provide British businesses with a first mover advantage to do mutually beneficial deals with major economies like the US. If the UK Government is positive and proactive, trade deals will be possible and profitable.

Engineers at the forefront are used to change. We’re motivated by it. We hope that Brexit provides as many opportunities as challenges for our business.

Stephen Sumner, Managing Director, Explore Wealth Management:

Brexit is pretty much unchartered territory for everyone and I think it is difficult to predict what the long-term impacts on the UK might be. I think the one thing we can say for sure however, is the likely effect of the uncertainty that Brexit brings to both the markets and clients’ portfolios in the short term.

Each time news hits the markets of either side (i.e. the UK or the EU) making progress with how they stand post Brexit, the relative perception of this news being either positive or negative in nature will cause the markets to react either upward or downward, thus affecting clients’ portfolio values. This will continue to impact clients and their portfolios for as long as any doubt remains as to how the financial aspect of Brexit will affect UK based businesses and the UK and EU financial markets as a whole.

Ultimately though, post-Brexit, the fundamentals of advising clients are unlikely to have changed. As long as investors are suitably diversified in line with their views on risk and overall investment objectives, the effects of Brexit long term we foresee as being no more dramatic than other events in history which have caused short term issues, such as the recent banking crisis.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

With the impending prospect of Article 50, how should the savvy prepare? Here Finance Monthly benefits from an expert answer, authored by István Bodó, Amaury DeMoor and Karan Lal of REL, a division of The Hackett Group.

The British referendum vote makes a mark in the European Union’s history, as the United Kingdom has taken the decision to leave the EU and will become the first nation to ever leave the union.

Brexit’s impact on remaining EU countries

This slightly unexpected outcome of the vote prompted jubilant celebrations among Eurosceptics around the continent and sent shockwaves throughout the global economy causing a new “Black Friday” across the major European financial markets. Stock exchanges in Germany and France ended down 6.8% and 8% respectively. Since the British, Italian and Spanish stock markets also had losses above 12%, this was the worst drop in a day since the 2007-2008 global financial crisis.

Though financial markets soon recovered, uncertainty remains amongst both the European Union and United Kingdom, as a big question mark lies on the future of their relationship and the synergies that lie within.

From the perspective of the remaining EU countries, the United Kingdom has been a very strong and influential member. The UK is often considered to be the bridge between the EU and the rest of the world due to its historic Commonwealth and political strength around the world. With this relationship now at risk and major decisions in the hands of politicians, this is creating nervousness amongst organisations. Failure to sustain current relationships and trade deals could be damaging for both sides.

Many argue that the EU is a more important trading partner for the UK than the UK is for the EU. However, with the UK’s strong demand for imports from the EU, with special emphasis on the pharmaceutical and manufacturing industry, this is an important factor that needs to be taken into consideration.

In value terms the trade surpluses with the UK are concentrated in a small number of EU countries – Germany, in particular, as the UK is its third most important business partner with 120 billion euros in different goods and services being sold to the UK. Trading with the UK after a formal Brexit may become difficult and more expensive for German and other European companies as new customs and regulations may be implemented. This could have significant impact on the German automobile and engineering industry, considering that every fifth car sold abroad goes to the UK.

Whether the long-term impact of Brexit will cause a shift in European Union business to the rest of the world or will result in a genuine loss in business is unclear for the time being. It is therefore imperative for organisations to be strategically flexible and prepared for either outcome. By capitalising on opportunities to release working capital, organisations can weather economic downturns, as well as fund new opportunities that may be on the horizon.

Importance of working capital and cash

Working capital is the amount of cash that is tied up in a company’s day-to-day operations. It is important that all three components (accounts receivable, accounts payable and inventory) receive focus to realise maximum cash benefit opportunities and identify and tackle inefficiencies in processes and procedures (Fig. 1).

Organisations across Europe have significant opportunities, not just to strengthen their balance sheet but also to move towards world-class working capital performance – in fact, companies could release more than 229 million euros within their receivables, payables and inventories per 1 billion euros of sales.

By highlighting days inventory on-hand and days payables outstanding, median- performing companies have an above 50% improvement opportunity, which can yield and support substantial cost optimisation opportunities, whilst also releasing cash to help fund acquisitions, product development or other investments (Fig. 2).

Another important aspect of shifting from median performer to world class is the higher focus on continuous improvement and sustainable results that becomes part of the company culture, making the whole organisation more effective and efficient. Companies achieving world-class working capital performance are likely to be high performers in other operational areas as well. They are the businesses that not only respond and adapt to changes in competition and customer preferences, but they are also leading the change and capitalising on emerging growth opportunities.

Although the unknown potential impact of Brexit cannot be directly compared to the global financial crisis of 2007-2008, key lessons can be learnt from that period, as poor total working capital management was a key factor in several liquidations. In these situations, cash reserves were not sufficient enough to run operations and whilst at the same time banks were reluctant to increase credit.

How will Brexit shift business?

Britain leaving the union could lead to a shift or loss in business for EU companies. The pound falling to historic low levels against the euro has significantly dented the purchasing power of the United Kingdom. It is for this reason that many UK companies will look to source domestically, as well as outside Europe in an attempt to hedge against the fall in pound sterling.

Although Article 50 has not formally been put into motion and formal negotiations with the EU have not yet begun, the UK already is turning towards her Commonwealth, as Prime Minister Theresa May has already visited India in late 2016. The British prime minister was also the first to formally visit US President Donald Trump in January 2017, as part of the special and historical relationship both nations share with each other. Meanwhile, the EU has also turned its attention to the rest of the world by entering a free trade agreement with Canada in October 2016.

With such sudden political shifts, European-based companies are at potential risk to face a loss of business, as the majority of UK imports currently come from Europe, with Germany, Netherlands and France being the top three exporting countries to the United Kingdom (Fig. 3).

Whether Brexit translates to a shift or loss of business for European-based companies, in either scenario it is imperative for businesses to have a well-managed working capital programme and a well-embedded cash culture that enables smooth adaptation to the new economic environment Europe will face. Achieving a healthy level of total working capital proves to be the less risky option, especially in times of economic uncertainty, and provides companies the ability to stay flexible and resilient against sudden changes. Therefore, initiating total working capital improvement programmes covering accounts receivable, accounts payable and inventory are strongly recommended.

Bracing for industry impact

London is heavily backed to remain the top financial centre in Europe despite exiting the EU. This is largely due to the fact that other European cities such as Frankfurt, Paris and Dublin simply do not have the capacity, resources, culture and educational infrastructure to become a London-like city. With the United Kingdom’s strong political connections to the rest of the world, London also remains the stronger candidate for foreign capital investment.

It is for this reason that the shift in jobs and business is likely to remain minimal for the financial services industry but might be different for core European industries such as manufacturing and pharmaceuticals. With the United Kingdom largely importing from both the manufacturing and pharmaceutical sector (Fig. 4), these industries, in particular, are likely to face either a decrease or loss in business, assuming the risk that the United Kingdom will no longer be part of the single market and the continuous weakening of the pound.

Due to its capital intensive nature and sensibility to economic swings, the working capital requirements of the manufacturing and pharmaceutical industries are generally higher in comparison to industries such as consumer goods and services. This is largely driven by the complexity of the supply chain and the varying working capital performance across sub-sectors, such as plastics, metals, machinery, fabricated products, building products, etc. In addition, the high cost of goods sold directly affects payables and inventories, making working capital performance even more important. To withstand the potential impacts ahead, detailed analysis and assessments must be made in the receivables, payables and inventory areas in order to implement strategies to optimise working capital and use the extra cash to cushion volatility.

Low inflation within eurozone

On the path to recovery from the global financial crisis, interest rates in the eurozone have hit their lowest point in recent history. The decisions made by the European Central Bank (ECB) and backed by ECB president Mario Draghi are largely driven to encourage borrowing across the eurozone, in order to grow and stimulate the economy following the financial crisis. Though the eurozone has by a close margin recovered from the crisis, interest rates have remained low due to inflation targets of 2% not being met.

The currently low price of oil is a major contributing factor to low inflation, as oil is the eurozone’s biggest import; thus, a future increase in oil prices could put the eurozone back at higher inflation rates and increase the likelihood of higher interest rates.

With interest rates currently low and business loans looking attractive, many businesses take the easy route to borrowing money, instead of optimising their working capital. Though many organisations benefit from such a low interest climate in the short run, working capital optimisation proves to be a more sustainable path for the long term, as it shows managerial efficiency, attracts investors and, most importantly, frees up cash. Having the ability to free up cash by improving internal processes always adds value, as it allows organisations to eliminate inefficiencies and remain flexible and dynamic in facing economic uncertainties such as Brexit.

Summary

The unknown impact that Brexit will have on the European Union and the United Kingdom further adds to the uncertainty and nervousness of businesses affected by the move and may lead to delays in investment decisions. Though the UK will hope to retain access to the European Common Market, major European companies will be watching closely as this could have significant impacts on the products they export to the United Kingdom.

Authored by Grant Thomas, Head of Practices at BJSS, the below provides Finance Monthly with particular insight into the top trends and movements UK financial services organizations will encounter in 2017, and increasingly in the future.

Financial services have always been at the forefront of technology. The industry was amongst the first to invest in mainframe computing, while it pioneered complex integration points to global payment switches, and in 1967 Barclays introduced the concept of self-service with the world's first ATM.

Fintech takes this innovative spirit a step further, and in spite of operational challenges, is driving the development of pioneering ideas to improve customer experience, efficiency and security in the Financial Service sector.

1. Brexit has injured Fintech. But not fatally.

One of the biggest questions to be answered this year is the extent to which Brexit will stifle Fintech innovation and if there will be an exodus towards competing financial centres such as Paris and Berlin.

At face value, things look challenging. Proposed restrictions to the free movement of talent may make it more complex and expensive to hire experienced staff. The process of securing VC funding is likely to become more rigorous as financiers look towards investing in less politically risky climates, but many opportunities still exist.

The key opportunities are that the lower value of the pound has made UK providers more commercially attractive, allowing local firms to compete against their offshore rivals. Added to this, changes to the regulatory environment, and continued R&D in complementary technologies will mean that London will continue to play a leading role in Fintech.

2. Product roadmaps will adapt to support the Bank of England’s new regulatory environment.

The UK will be keen to remain an attractive financial destination, so the Bank of England will take a critical look at its regulatory environment, deciding on which financial regulations require tweaking, diluting or eradicating. The regulator will also look at introducing new financial products, as demonstrated by a recent announcement of its ambitions to launch a Bitcoin-rival cryptocurrency. As a result, Blockchain, which automates and adds transaction security, will continue to attract investment.

Also, evolving regulatory directives such as Open Banking and PSD2, will create an even more difficult operating environment for established players – there will be great demand for Fintech providers to help plug this gap.

3. Mobile devices will become Fintech’s primary channel.

According to Ofcom’s 2016 Communications Market Report, Smartphones are now our preferred channel for accessing online content. Now they are set to become the main way of managing personal finances. Already three out of every ten mobile internet users use their devices to access their bank accounts, while two out of every ten use their devices to complete electronic payment or transfer transactions.

While most consumers are already familiar with services such as Apple Pay, Android Pay and Samsung Pay, Fintech providers will exploit online as well as built-in NFR and biometric technologies to introduce peer-to-peer payments, digital-only banking, forex, and mobile wallet products.

But mobile is just one part of the future of Fintech, and the ability to crunch diverse and deep datasets will drive greater innovation.

4. Customer take-up will be driven by Big Data, Data Science and Analytics.

Fintech providers will look at exploiting tools such as Hadoop, Python, NoSQL and Spark onto Private and Public Cloud services in order rapidly to deliver outcomes and to identify and understand customer behaviour and target markets.

Big Data will be combined with sophisticated machine-learning algorithms to upsell products and services based on key life milestones. This use of data science will proactively push financial products based on customer behaviours, instead of simply waiting for clients to submit product applications. Modern computing and advanced mathematical techniques enable personalisation, at any scale, and without human intervention.

5. Artificial Intelligence and machine learning will use this data to put a human face in computing decisions.

AI technology presents a huge opportunity for Fintech providers because it combines the rules-based reality of computing, with a human interface. It enables providers to take quick, business-safe decisions while reducing the processing time of routine customer enquiries. The model can be adjusted to accommodate customer preferences, their demographics, and interests. Thanks to language interpretation, a customer will be able to ask a question, which will be processed and answered by a Bot either by through text to speech or instant messaging services.

AI has development commitment from the big players. Apple, Amazon, Google, Facebook, IBM, and Microsoft have partnered on a non-profit joint venture which aims to “conduct research, recommend best practices, and publish research under an open license". AI is becoming mainstream.

By adding machine learning to the mix, the accuracy of chatbot responses is improved. When combined with AI and superior user-driven service design, Fintech providers are able to provide compelling and personalised customer interaction products to improve reliability and customer satisfaction. Those Fintech providers who focus on using AI and machine learning will pioneer a customer experience revolution: CX2.0.

This will lead to the death of ‘off the shelf’ and proprietary one size fits all.

Wide-ranging standards such as Blockchain, mobile, Big Data, AI and machine learning preclude a single one size fits all “off the shelf” solution. Fintech providers with ambitious roadmaps will embrace low-latency products based on enterprise-grade Open Source which are proven and secure.

Also, given the speed at which this new technology is evolving, Fintech providers will adopt an Agile approach to building their products. The benefit of Agile is simple. It accelerates delivery processes, and through on-going planning and feedback, ensures that value is maximised. Crucially, Agile also supports continuous delivery, ensuring that quality is maintained and that any risk of failure is reduced. With Agile and continuous delivery, Fintech providers will be able to rapidly develop and refine their products to support an ambitious roadmap. They enable Fintech providers to ensure that the engineering of their products, integration, functional and non-functional tests, deployments and provisioning are catered for throughout.

Britain’s role in the Fintech space is secure and, thanks to a range of next generation technologies, coupled with an improving operating environment and Agile development processes, will provide compelling products and innovation that will boost service provision and reduce costs.

2016 was an unprecedented year, with massive global political upheaval, the rise of Artificial Intelligence (AI), and centre stage being taken by issues such as ‘post-truth’, resurgent nationalism, and technological unemployment. These social, technological and political shifts have significant potential ramifications for all aspects of global finance, commerce and markets. Hence, with the world now more accustomed to such seismic agenda changing developments, the Fast Future Publishing team have turned our thoughts to the future and dipped into our recent book The Future of Business and our upcoming release The Future of AI in Business to suggest what might happen in the year ahead. Below we provide our 2017 year-end report, outlining 20 critical trends and scenarios we could see emerging, and highlight their potential impact on economic and financial markets.
Politics, Government and Regulation

1. The Presidency as a Business Model – Following his inauguration in January 2017, President Donald Trump rides roughshod over accepted norms of presidential behaviour. After his first year in office, analysts suggest that he could easily exceed President Putin’s estimated net worth of US$200Bn by the end of his first term, and could ultimately become the world’s first trillionaire. In this rapidly changing reality, businesses must become very aware of the new commercial opportunities that are opening up as a result of the president’s strategy. Equally vital will be to see where opportunities may disappear – a key example being the US car industry which is being strongly discouraged from investing overseas.
2. Who Needs a Constitution? – While opponents desperately seek a mandate for his impeachment, Trump’s team, his supporters and the major beneficiaries of his reign seek to extend the powers of the President. They also pursue the removal of limits on the duration of the US presidency and the number of times an individual can hold the office. This endemic uncertainty around the presidency could inspire volatility in financial and currency markets.
3. Brexit Brouhaha - Despite invoking Article 50 in the spring, the UK government is blocked at every turn by a string of legal challenges that hamper progress. The 'UK question' hyperbole was increasingly used by both sides in several national debates – from garnering support by claiming to represent the political will of the UK electorate on the one side to scaremongering on the risk to the UK economy and the European project on the other. This could lead to a number of companies wanting to exit the UK. However some of the incentives created around the future of Britain could encourage investment in the country – particularly the tax haven strategy.
4. May Day - Exasperated by the Brexit roadblocks and under pressure from many in her own party, Prime Minister Theresa May announces a general election for October 2017 to let the public decide if they want her Brexit plan. The result is a hung parliament, with UKIP the biggest single party and Nigel Farage leading the next coalition government. This dramatic political over-haul could lead to chaos in financial markets, initiate an exodus of foreign firms and talent, drive a reduction in corporate investment, and induce huge hesitancy in individual spending behaviour.
5. Wildcard Wagers - The tumultuous events of 2016 sparked a rise in public event betting markets, with 2017 becoming the year of the wildcard wager. Betting shops saw an incredible rise in bets being placed on all manner of events from animals escaping zoos to the sudden collapse of buildings. A new breed of AI-based betting companies emerged which even allowed us to bet on the life expectancy of an individual. These companies draw on social media and ‘permissioned access’ to personal data to determine your life expectancy. Those that give permission for personal their data to be accessed by the betting companies can then share in the proceeds of the bets on their life. While the market might be created by relatively new players, existing betting companies might also see it as a lucrative new opportunity.
6. Will They or Won't They - While regulators were called upon to question the ethics of betting on life or death scenarios, advocates saw the potential for public engagement through such betting, and single interest political groups arose around the potential outcomes of specific events. Online political networks surrounding betting events were created by disparate groups; with individuals identifying as will-happen or won't-happen. This saw sudden huge surges of political activity and engagement, which dropped off drastically after each such event. These new revenue generation opportunities might well be short lived if governments seek to control them. But there is an interesting new technological application; we might see AI being used here to dynamically create, operate and close these markets based around short term events.

Technology and Privacy

7. Artificial Intelligence – Following the hype phase of 2016, real applications started to emerge in 2017 – such as intelligent assistants on our smart phones and medical decision support tools. Cash-strapped governments turned to AI for the automation of a range of functions from processing student loan applications to handling divorce adjudications. The impact of AI could see businesses deliver a dramatic reduction in operating costs and exponential revenue growth.
8. Driving Ambition – In a bid to become a key centre of innovation and sector development in driverless vehicles, China and the UK led the way in allowing on road trials of driverless vehicles. Both governments accelerated the process of regulatory change to allow fully or semi-autonomous cars, trucks and buses onto roads across their nations in 2018. One of the most interesting early market impacts of this development could be the early arrival of very low cost upgrade kits that let us add autonomous features to our vehicles
9. Self-Powering Nations – Faced with continued uncertainty over the price, availability and environmental impact of fossil fuels, 2017 saw a record number of nations powering themselves with renewable energy for at least part of the year. We could see a significant reduction in overall energy production and distribution costs. This could bring a benefit to the consumer whilst also reducing long term environmental impacts and clean-up costs.
10. Leave me Alone – 2017 saw a dramatic increase in the availability and adoption of Blockchain technology-based personal privacy management applications. By year-end these are increasingly used by individuals to secure their own communications and information storage to avoid sharing data with massive corporations such as Facebook and Google. Brand new business opportunities could emerge for providers that can offer these cutting edge privacy protection services.

The Economy and Business

11. Corporate Flight – Uncertainty over Brexit leads several major companies to announce that they are moving their headquarters, R&D functions and core operations to Dublin, Amsterdam, and Frankfurt. The exodus is well underway by year end. If large high earning corporations leave en masse, there will be a dramatic impact on projections for long term GDP growth and potentially violent fluctuations in share prices.
12. Wealth Haven Britain - Taxes are so 1990’s – to help cushion the expected economic impact of Brexit, the UK government tries to retain and attract foreign investment and wealth. The key pillars of the strategy are the introduction of the lowest corporation taxes in the G20, with massive increases in tax allowances for both R&D and establishment of local production facilities. In parallel, a range of personal taxation measures are introduced that make Britain look highly attractive when compared to the best of the offshore tax havens. Britain will face huge opposition from other countries if it chooses to undercut them with its tax regime. However, this could also see rapid acceleration of foreign investment and the arrival of private foreign wealth.
13. Masters of the Universe - The major technology players such as Google, Baidu, IBM and Amazon continued to pull away from the pack with ever-more sophisticated technology applications. These range from super intelligent ‘brain in the cloud’ solutions to extract insight from the wealth of data being created by the Internet of Things, to smart assistants managing our daily lives and instantaneous translators covering over 50 languages. These new hyper-personalised services could accelerate revenue growth and boost share prices.14. Digital Dementia – In 2017, the corporate sector and many governments continued to adopt a somewhat cautious approach to the use of disruptive technologies such as blockchain and AI. Those who are pursuing expensive digital transformation projects began to see that their initiatives are eliminating the distinguishing human element and effectively commodifying everything they do - as digital differentiation is impossible to maintain. Stock markets began to write down the value of firms that appear to have got lost in this digital maze – whilst advocating those that appear to be using the technology to support talent rather than replace it.

15. Parallel Worlds – A parallel universe of new economy businesses emerges here on Earth. Digital era mindset firms proliferate – trading with each other using Blockchain contract systems, transacting in digital currencies, deploying AI for core activities, and – in some cases – creating entirely digital Decentralised Autonomous Organisations with no physical employees. In the face of broader uncertainty over the future of mainstream businesses, we could see a significant amount of corporate investment and venture capital money flowing to such businesses.

16. The New Professionals - A raft of AI client advisor applications are launched by the major legal, accounting and consulting firms – automating tasks previously performed by professionals and driving a reduction in headcount. This may induce a reduction in the pricing of services from these firms – but could simultaneously drive significant growth in revenue as they can offer these services to more clients in parallel without having to increase headcount.

Social and Leisure

17. Technological Unemployment – The use of new smart technologies, coupled with increasing automation and the termination of ‘non-viable’ activities by large businesses, sees unemployment rising across a range of sectors in countries around the world. This could have a dual impact – both on the level of debt in society and average incomes.
18. The Crumbling Middle – Stalling growth, technological unemployment, The Trump effect, Brexit uncertainty, and general cost cutting bites hardest in the educated middle classes in professional and managerial roles across the developed world. The impact is felt in areas as diverse as theatre attendance and private school enrolments through to the purchase of new cars and holidays.
19. Virtual Immortality - Holographic versions of David Bowie and Prince go on tour. A student team were able to generate new stage performances for these and other artists using previously unreleased tracks and composite digital imagery. A crowdfunded campaign raised enough money from fans to finance a global tour for Bowie and Prince. Holograms of the stars toured the planet, occasionally doing duet gigs together. The use of Virtual Reality and Augmented Reality allows for viewers to purchase VIP and Platinum VIP passes that put them in the front row on even on stage for the performances. These brand new markets will create new pricing opportunities – could these holographic experienced be priced similar to an original stadium concert, or would they be more aligned with the cost of attending the cinema.
20. Robo-Retail -The traditional shopping model was subverted as the Amazon Go concept store was rolled out across the US. Using smart phone technology, item tracking and mobile payment methods, shoppers simply pick up their desired items and leave - the purchases being automatically logged and their accounts debited. The stores saw roaring trade, with customers spending much higher amounts than they normally would, with Amazon’s more traditional competitors forced into a near permanent ‘black Friday’ mentality of continuous discounting. This could drive significant growth for the early adopters – but may see a significant decline in revenue for the slower moving competitors.

About Fast Future Publishing

At Fast Future Publishing we develop our books using an exponential publishing model, and we have completed the successful launch of our first two books – The Future of Business (top five per cent of all business books in its first year), and Technology vs. Humanity (Amazon bestseller within one week of launch).

We are a new breed of publisher founded by three futurists – Rohit Talwar, Steve Wells, and April Koury. Our goal is to profile the latest thinking of established and emerging futurists, foresight researchers, and future thinkers from around the world, and to make those ideas accessible to the widest possible audience in the shortest possible time. Our FutureScapes book series is designed to address a range of critical agenda setting futures topics that we believe are relevant to individuals, governments, businesses, and civil society

Rohit Talwar, Founder and CEO

Rohit Talwar is a global futurist, founder of Fast Future and an award-winning speaker noted for his provocative content. He advises global firms, industries and governments on how to survive, thrive, spot and manage emerging risks and develop innovative growth strategies in the decade ahead. His interests include the evolving role of technology in business and society, emerging markets, the future of education, sustainability, and embedding foresight in organisations.

Katharine Barnett, Concept Editor

Katharine works on creating, developing and editing a variety of content for Fast Future Publishing. She has a broad range of futurist interests including societal and behavioural norms, digital and information ethics, biomedical ethics, genomics and pharmacology, and the future economies of the developing world.