Our Corporate Finance Partner, Steve Plaskitt, attended an economist event on Friday 8th September. It was hosted by HSBC and their UK economist Mark Berrisford Smith, a great communicator of detailed economic graphs and forecasts. Steve shares his thoughts from the event in this blog post…
The main focus of the event was the world economic situation, which in short was summarised as “Brexit confusion amid a global revival.” However, as with all economic presentations, it always seems easier to explain the past than to perfectly forecast the future!
The Brexit confusion had arisen from the apparent lack of a negotiation strategy on the UK side of Brexit negotiations. This was unsettling the markets and was perhaps responsible for weaker UK forecast growth compared to the rest of the EU.
Looking at the UK Brexit negotiating position from the external point of view of an interested follower of the news, it would seem that the UK negotiating team is not as well prepared as its efficient/bureaucratic European counterparts. Examples of this lack of preparation would seem to include:
- No firm consensus as to what “Brexit” means as a single vision or aim for international agreements.
- Whether there should be continued membership of European Economic Area (eg “the single market”).
- Whether the Swiss and other Nordic countries would want Britain to be part of model of the European Free Trade Agreement which would cover non agricultural goods.
- Whether there is simply a new trading relationship.
- Whether there are transitional agreements and for how long.
- Whether there should be an exit bill of £0m, £30m or £60m or £100m?
- What is the cost/benefit to UK trade (ie in lost/gained UK GDP) of the above scenarios?
- How and when would such an exit bill be actually paid given the huge levels of UK national debt?
- Whether the Brexit negotiations should follow the proposed timetable given that the clock is already ticking before the UK exit.
Whilst it is easy to find confusion in the UK’s Brexit stance, it is also easy to see the lessons that can be learned for corporate deals. For example, good planning is important before you enter into any negotiations, particularly if you are looking to sell your business. You need to:
- Plan your own exit and understand your vision for yourself and for your business afterwards
- Build an experienced team around you who can consider different scenarios
- Build a rapport with your opponent and seek to understand their position
- Know what is your own “best and realistic alternative” so that you know whether a proposed deal is a good deal. You also need to understand the “best and realistic alternative” of the bidder to understand how they may react
- Gather information which allows you to present your case clearly and persuasively
- Understand “the rules of the game” so that you can anticipate negotiation positions before they arise and find a way through them within a suitable timetable
I am sure the UK Government will resolve the Brexit negotiations in the best possible way and that when we look back (with 2020 hindsight, of course), the economists will be able to explain the past with a lot more ease than they can when looking forward.
Steve Plaskitt is partner in the Tait Walker Corporate Finance and has seen negotiations first hand for many corporate mergers and acquisitions.