Brexit and Bournemouth Business:
What Does the Future Hold?
The voters of Bournemouth made their feelings on continued EU membership pretty clear in the referendum, voting 54% Leave, 46% Remain. A lot has changed since then. We’ve seen the occupants of 10 Downing Street change three times, Sterling’s value decline and fall, financial markets – including insurance – experience massive movements, leave deadlines come and go, and politicians’ stances on what is achievable change on almost daily basis.
But now with a new Brexiteer PM, a proudly pro-Leave cabinet, a looming – and apparently immovable – exit date of the 31st October, the Brexit saga looks set to end. But what does Leave mean for Bournemouth’s businesses and the wider region’s economy? What will happen to the local property market – for homes, holiday homes and Bournemouth’s landlords’ rental properties?
In this latest blog from Coversure Poole, Bournemouth’s leading business and property insurance brokers, we’ll look at the evidence and see whether Brexit means boom or bust for Bournemouth…
Financial Services
Most outsiders think that Bournemouth is all about tourism, holiday homes and hospitality. Now while the town is great at all these things and they all contribute significantly to the local economy, the largest private employer is the American bank, J P Morgan. With over 4,000 employees at its Chaseside base and countless more jobs dependent on its employees, any threat to its future is a threat to Bournemouth’s future. And that, sadly, is what Brexit means.
Tobias Elwood has stated publicly that a no-deal exit could lead them to ‘think about departing Bournemouth.’ J P Morgan’s CEO Jamie Dimon said the company’s future in the UK would depend on the “passport” arrangement which allows banks to sell services throughout the E.U. If we see the recent hardening of attitudes continue and the UK leaving without a deal, then the consequences both locally and nationally could be severe.
And its not just those in the financial services sector that could be hit. The jolt of a no-deal would create turmoil on the currency markets with Sterling dropping like a stone as it did in the aftermath of the result’s announcement and a likely fall in the stock market. Such outcomes would affect everything from pensions to holidays. Even insurance quotes could be impacted. Many insurance companies are large multinational corporations and if they feel their financial positions are threatened then premiums could rise and they could become much more risk-averse.
No-Deal Brexit: More Project Fear?
Of course, if the last three years have taught us anything it’s that Brexit has generated more scare stories than Stephen King. The recession, the emergency Budget, Frankfurt replacing London as the finance capital of Europe, none of this has come to pass. The reality is that moving 4,000 employees – even for someone the size of J P Morgan – isn’t easy or desirable. A no-deal could well force their hands, but even in that situation it would take time; time that could be used to secure an arrangement with Europe on a different relationship. That’s the hope anyway.
Tourism
Tourism is big business in Bournemouth. According to the Council, in 2015 28.5m visitors contributed £1.8bn to the local economy helping it to provide 12% of local employment. Figures from Visit England suggest that 50% of all visits to UK coastal resorts are from EU nations – most notably Germany and France. So, what will happen when we leave? Two scenarios immediately present themselves:
- Decline – a weak pound makes the UK as a whole an expensive destination for European travellers. There’s also the ‘sadness’ or ‘hostility’ toward the UK’s leaving that may deter further potential visitors who will look to other European destinations and, going with the long-term trend, favour city breaks instead.
- Rise – what the 2015 tourist figures reveal is that domestic tourism actually accounts for more revenue nationally than that from overseas visitors. Domestic trippers spent £66bn versus £19bn by foreign visitors. They also noted a trend in domestic overnight trips in England and tourism is growing steadily across holiday, visiting friends and relatives (VFR) and business travel. This growth is set to continue and see a 3.8% increase by 2025. Since Brexit began, there’s been a fall in demand for European holidays and if visas were required post October 31st then that would likely make places like Bournemouth even more attractive.
Bournemouth’s Property Market
In areas as lovely and desirable as Bournemouth and holiday home paradise Poole, we’ve seen the property market buck the national trend and keep on rising. From April 2018-2019 price growth was at 2.4% according to the Nationwide. Growth is slowing, however, and since April prices have slid 0.2% each month. Now while such declines can hardly be called a crash, they are indicative of the concerns many have over Brexit.
So, what does Brexit mean for the region’s property market? Again, this is dependent on the sort of Brexit we get. If we leave in an orderly fashion then the omens are good. As business finally sees certainty so investment will be released, the likes of J P Morgan can stand their relocation plans down and property owners who’ve put moves on hold will feel free to go ahead. In short: the property good times can roll again.
A no-deal on the other hand could have serious effects. A disorderly exit on the 31st will prove a massive shock to the global markets – that’s something everyone seems to agree upon. In the short-term interest rates are likely to climb as Sterling dives, businesses will be handed more uncertainty and the property market will slow as mortgages become more expensive and harder to come by.
Longer-term thigs will recover – they always do – but the ride may be bumpier than crossing to Cherbourg in a January gale.
International Trade
The clarion call of pro-Brexit politicians has always been that Britain is a trading nation and that there are nations queuing up to do deals. Australia, the US, Japan and South Korea have all made favourable noises regarding deals and in time these should become a reality. So how will local international traders fair come 1st November? Let’s look at this from Sunseeker’s perspective.
Sunseeker are arguably Poole’s most famous business and exports are key to their success. Recently – and in no small part helped by Sterling’s slump – they have returned to profit and have big plans for the future. A no-deal Brexit with its attendant currency devaluation could mean an even greater competitive advantage in places such as the US, Middle East and Far East, their key export markets.
As with so much with Brexit though, it’s not that simple. Tariffs, border movement problems, immigration restrictions and export delays are all possible things which could really hurt the business. Then there’s the potential global economic impact of a disorderly exit: bankers, financiers, investors and the like are likely to feel the turbulence most acutely – the same group who are Sunseeker customers.
What Does the Future Hold For Bournemouth Post-Brexit?
With its buoyant property market, exposure to international finance and trade, proximity to the Continent and the support it has received from the EU, Brexit will have an impact on our region. How radical that impact will be depends largely on the manner in which we leave. Leave with a deal and it could be business as usual – even more business as usual. Leave without a deal and the waters look a lot murkier, at least in the short-term. One thing that we can be sure of is that we will survive and thrive. That is just what we do.
John Palmer
Managing Director
Coversure Poole