opinion ANOTHER DECISION DAY


It is, one could suppose, possible that Mrs May’s government may reach some sort of accommodation with the opposition that would permit the passage of the bill formalising the UK’s exit from the European Union, prior to the 31 October deadline agreed as an extension to the original date of 29 March. There is ample evidence to support the contention that the UK


citizenry is collectively fed up with the current state of play and the failure to implement the results of the 2016 referendum. The protracted and unsuccessful attempts to secure the measure’s passage through the House of Commons have left the electorate suffering from what may fairly be described as ‘Brexit fatigue’ and have left necessary discussion of other matters of national significance being deferred to an uncertain future. What remains important, however, is that the six-month extension


to Article 50, which will formalise the UK’s departure from the EU, should be used constructively. There is a widespread view that, prior to the referendum in June 2016, the chattering classes assumed that a ‘Remain’ vote was the inevitable outcome of the process. The actual decision, to leave, took most commentators by surprise. In the financial markets, the vote resulted in an immediate shift


against sterling: from $1.4798 on the day of the referendum to $1.3621 and is now closer to the $1.30 mark. Likewise, the euro which, on the day of the referendum stood at €1.3039 and within a week had fallen to €1.2177. How are we to characterise this depreciation in the value of sterling relative to the dollar and the euro? Partly it resulted from the unexpected nature of the referendum result, but partly also reflected markets’ broader concern about the future of the UK economy. A glance at the longer term exchange rate movements against the euro shows that the referendum barely altered the rate of depreciation of sterling against the euro which had been in train since the middle of 2015. The fall from the heady days of €1.75 in May 2000 to near parity at the beginning of 2009 went largely uninterrupted. The rate then climbed steadily to €1.44 in July 2016 but began to fall from November of that year. Since bottoming out in August 2017, the exchange rate has staged a small recovery and is now at levels similar to those seen throughout the period from 2010 to 2013. Similar longer term patterns can be seen for the dollar exchange rate. But there is little debate that Brexit concerns have weighed on the strength of sterling. Following the referendum, the various sectors of the British


economy will have had, with varying degrees of enthusiasm, set about the task of analysing the likely effects of Brexit on their businesses. This will have included the feed industry, amongst the broader group of companies comprising the agricultural supply trade. The immediate impact any depreciation in the pound is to increase the UK price of


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materials priced in dollars or euros, although supply and demand will still play its traditional role. A significant proportion of the feed industry’s raw materials are denominated in the two currencies, notably those relating to their protein components. It remains to be seen whether the six-month extension to Article 50 will be enough to establish a new equilibrium for sterling’s value against these two major trading currencies. Perhaps more importantly, the extension to Article 50 will give


time for further mature consideration of the pros and cons of leaving the EU. While what may be described as the emotional context of national


sovereignty is an important element of the whole discussion, what needs an especially rigorous scrutiny is the economic balance of advantage and disadvantage of EU membership. While the debates in the House of Commons on the Prime Ministers proposed terms for leaving the EU were largely couched in emotional terms, there appears to have been little serious consideration of the economic elements. It was, after all, the search for the economic advantages of what was membership of the European Economic Community – the EEC – that first led British politicians towards the idea that the UK could benefit by becoming a member of a larger trading bloc. The EU as presently constituted comprises the largest trading bloc in the world, surpassing even the US. Following its exit from the EU, it is true that the UK could revert to World Trading Organisation (WTO) membership, the intergovernmental organization that is primarily concerned with the regulation of international trade between nations. However, this is regarded by many observers as a stop-gap measure whose longer- term economic effects are unquantifiable and on which the UK could only wield influence at the margin. It is important, therefore, to stress the need for an objective


analysis of the benefits and costs of the UK remaining a member of the EU. What also needs to be objectively assessed is the pros and cons of the potentially available alternatives. What are the realistic chances of securing a comprehensive trade deal with the United States? Would the UK have a better chance of securing a trade deal with China under WTO rules than as a member of the twenty-eight-nation trading bloc currently comprising the EU? These are a very small fraction of the questions that need to be addressed in the next few months. To the many questions that UK companies and individuals must


ask themselves during the succeeding months leading up to 31 October there will, inevitably, be a multitude of answers. That is to the good – the debate on what is the most critical decision taken by the UK for many years deserves and, indeed, must, be thorough and wide ranging. However, at the end of the day, a decision will have to be taken about what to do about Article 50, and whether or not to proceed.


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