Brexit and the Northern Powerhouse
As the two main political parties turn to infighting and internal electioneering, businesses across the country, and in particular the North, will be wondering how Brexit might affect their futures and potential to grow in the coming weeks, months, and years.
On Monday, following a much-discussed absence from the public eye, George Osborne made a speech on the state of the British economy following the public’s decision to leave the EU. It was briefed that the Chancellor’s remarks were an attempt to calm the markets and halt the slide of the value of the pound which had, up until that point, fallen by over 10%. Although the speech worked to the extent that it seemed to curb any further dramatic downslide, it did also offer a glimpse of a potentially bleak future for Britain as Mr Osborne announced that tax rises and cuts to expenditure were inevitable to make sure that Britain “lives within its means”.
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Of particular concern to those in the North will be the effect such cuts might have on the Northern Powerhouse, the policy programme led by George Osborne aimed at generating investment into Northern cities such as Manchester, Liverpool, Leeds, and Newcastle. With David Cameron announcing his resignation and a new Prime Minister likely to be in place by September, the Chancellor seems likely to be replaced. Whether his successor will believe investment in the North is such a high priority remains to be seen, meaning a very real potential for the Northern Powerhouse to be kicked into the long grass.
Ed Cox, Director of IPPR North, has recently made clear his belief that a parting of the ways between Britain and the EU would disproportionately affect the North, saying, “Whatever you believe about the Northern Powerhouse, few can deny that our trading relationships with our (soon to be former) EU partners matter much more to northern businesses that they do to the City of London.”
Cox’s warning is particularly stark after Standard and Poor’s, the financial services and credit-rating agency, cut the UK’s credit rating from AAA to AA, meaning the cost of borrowing money in the international market will increase. But perhaps more alarmingly, Britain’s exit from the EU could also threaten investment from China. The Northern Powerhouse has substantial backing from Chinese investment but there are suggestions that this could be under threat following Thursday’s referendum result, particularly with Chinese Premier, Li Keqiang, saying, “We won’t allow roller-coaster rides and drastic changes in the capital markets… it’s impossible for each country to talk about its own development discarding the world economic environment.”
Whatever the future, there is clearly a need for business in the North to be reassured. Very little has been said to address fears that the Northern Powerhouse will be abandoned or at least rolled back, which has meant that comments from Chinese and European leaders on the financial implications of Brexit have dominated the news. This has done nothing but spread uncertainty in Northern England: it’s time that our political leaders addressed this.
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