Cambridge adapts to chaos of Brexit
The chlorinated Brexit chicken is coming home to roost. The reality became apparent last week when Cambridge serial entrepreneur and investor David Cleevely tweeted: “With a heavy heart I have sent the first email laying the ground for moving manufacturing out of the UK because of Brexit and the tariff and certification problems it will cause. Real businesses. Real employment. Real taxes. Lost.”
Brexit is actually just one part of a rollercoaster sending shock waves through the UK economy. Many would argue technology, with its online retail and service portals, and the incoming AI/big data juggernaut, is what we should be worrying about. But these technological developments bring opportunities too, and all Brexit seems to be bringing is risk. Businesses like to minimise, negate or offset risk, which may explain why business investment in the UK’s internal infrastructure has flatlined since the referendum. Better to wait and see.
UK shares are down 0.3 per cent since June 2016, while the stock markets of other developed countries have grown by 26 per cent, according to a recent FT study. Inward foreign investment has fallen 20 per cent, according to a BBC report. The sound of plugs being pulled has been heard in Sunderland, in Coventry and in Swindon. Banks have moved more than $1trillion out of the City of London since June 2016. It was inevitable that Cambridge businesses take the steps needed to survive and if that means porting the Cambridge business model overseas à la David Cleevely then so be it. It’s a good model.
For some, of course, it’s business as usual. Every company has different levels of reliance and involvement in overseas markets. There will be winners and losers. Those sectors reliant on just-in-time production are most vulnerable, but the services and agriculture sectors are also fragile. In Cambridge, the life sciences sector is obliged to adapt to the European Medicines Agency moving from London to Amsterdam. Diamond Pharma Services and Global Regulatory Services are two smaller companies who have opened offices on the EU mainland: do you think the bigger pharma firms don’t have contingency plans because they didn’t announce them publicly yet?
Looking ahead, one of Cambridge’s biggest worries is being able to hire staff. As Cambridge Consultants’ PR manager Richard Leyland put it: “The only significant risk factor in terms of our own business is simply the recruitment challenge. It’s necessary for us to get the best talent and anything that gets in the way of that is of concern to us.”
On Friday I visited economics consultancy Cambridge Econometrics. Basically, I was fishing for insights. The encounter turned out to be very illuminating. A hugely talented strategic insight team flourishes at Cambridge Econometrics’ Covent Garden base.
Chairman Richard Lewney, managing director Phil Summerton and marketing and communications manager Emma Fitzgibbon explained that when the referendum result came in, the firm applied its analysis and interpretation skills – hugely in demand by the European Commission among other clients – to its own future.
“We took steps to hedge against a no-deal as soon as the referendum happened [in June 2016],” explained Phil. “We’ve opened one office in Brussels and another in Budapest.
“The balance of our work is split between one-third UK-based, which is national, local in NGOs; one-third in Europe, mainly for director-generals and other organisations are in the European policy space; and a third international, such as the World Resources Institute, and the International Renewable Energy Agency (IRENA) in Dubai.
“Our work with the European Commission is domiciled more or less in the EU but no one knows what the public procurement rules will be under a no-deal. At some point there will be a reciprocal arrangement but that will take a while to sort out – the biggest problem is that it will not be high up on the list [of things to sort out].”
The physical location of staff will inevitably require flexibility.
“It’s possible Cambridge staff will spend some time in Brussels or Budapest.
“Where we need to grow, we put up facilities, and the question is how much we need to do.”
Some sort of relocation?
“Possibly, but maybe it will mean that as people leave here [Cambridge] they’ll be replaced from Brussels or Budapest.”
This isn’t about dismantling the Cambridge position. Far from it.
“It’s about maintaining our position in the European market,” says Richard. “What’s happened confirms the rightness of the decision we made straight after the referendum – it takes time to build companies and get good staff.”
“We’ve prepared everything we need to prepare,” adds Phil.
The time has come.