Money Talk: Brexit means business as usual... for now

It seems like a very long time since June 23. Yet as this is being written, the new Prime Minister is still making the last appointments of her new government team and everyone else is still grappling with the possible consequences of the referendum result. So it was quite interesting to have had a chance conversation with a petrol retailer client on the same subject just a few days ago.

Now this retailer was distinctly ’old school’ he’s been in the business a long time and he was pleased with the idea of Brexit. He was one of those who’d voted for it without ever expecting it to happen. He’d also just been reading the news piece on the Forecourt Trader website regarding the EU Tobacco Products Directive (EUTPD2) and started by saying: "Of course, we can forget about that now." In other words, he was under the impression that not only would the forthcoming ban on cigarettes in packets of less than 20 not now happen, he might even be able to go back to selling Woodbines in packets of five soon. That might just have been his little joke, but he was soon into his stride: "No more of this Living Wage nonsense," and the "Bio-fuels rules would also be scrapped".

Tentative response

Now being polite, well brought-up accountants, we’re not in the habit of picking unnecessary arguments especially political ones with our clients. It’s not good for business or blood pressure. So our response was a little tentative: what’s happened on your forecourt since the vote?

The answer, of course, was only that his pump prices had risen by a few pence almost overnight, and were increasing a little every week. Nothing else. Nobody had asked him when he was going to convert his pumps to show imperial gallons and pre-decimal pounds, shillings and pence; or when he was going to start selling his confectionery in bags marked with pounds and ounces. But despite nothing having actually changed yet, he was pleased with the assumption that somehow, in the next few months or years, he’d see the roll back of all the things that irritated him or made his business life a bit more complicated.

But just what, if anything, is likely to change on the forecourt in the foreseeable future? Realistically the answer is likely to disappoint our friendly client. Take the EUTPD2 changes as an example. Technically the UK (and let’s still call it that, at least for now) is still in the EU. Aside from the legal question whether the referendum result is legally binding on Parliament or the government at all (which is pretty fundamental, when you come to think about it), at this time the UK government has not officially activated any formal ’get-out’ proceedings. They haven’t even announced exactly when they will start that process, but most commentators are agreed that it will take years from whenever they press the button: two, five or 10 take your pick. In the meantime, retailers are expected to comply with EUTPD2 by the end of May 2017, with further implementation (regarding flavoured cigarettes) due by 2020. The chances of the May 2017 deadline being scrapped before then are almost zero, and there’s a pretty good chance that the 2020 measures will also still be applied. Quite apart from the UK’s status relative to the EU, there’s another reason why it isn’t going to happen.

anti-smoking stance

For the past 15 or more years successive UK governments have taken their own anti-smoking measures, and are hardly going to back-track now. Nobody forced the UK government to ban smoking in pubs. Granted some of the detailed regulations and timescales have been designed to harmonise with what the rest of Europe was doing and sometimes it suited governments to imply that unpopular moves originated from the EU, but the basic anti-tobacco stance wasn’t driven from Brussels and it won’t change because of Brexit.

Or consider bio-fuels and everything else connected with climate change regulations. Again, for many years UK governments have pursued a domestic and international CO2 agenda that sometimes harmonised with the rest of Europe and sometimes didn’t, but one which was distinctly not imposed on them by the EU.

The nature and timing of any climate change policies and legislation will still be a UK government decision, albeit that if the UK wants to have continued future access to EU markets it will most probably need to keep relatively close to whatever else the Europeans do, and when they do it even though, of course, the UK won’t be able to influence the relevant EU policies if/when Brexit actually happens.

Now, take our friend’s last-mentioned ’hope’ the Living Wage and by implication, the National Minimum Wage (NMW).

The NMW was instituted by Blair’s ’New Labour’ government back in 1999 (without any requirement from the EU), while the Cameron Conservative government introduced the Living Wage a few months ago (again with no EU input). Now, while it’s entirely possible that some future UK government might allow the pay rates to stagnate, does anyone expect them to formally repudiate the policy, or repeal the legislation?

The long and short of it is that Brexit is a long-term process, not an instant event, and only the first step has been taken so far.

We’ve seen the pound fall, and there are rumours of property prices starting to do the same, but at the moment nobody knows what it will actually mean in the long term. Although if Scotland (and possibly Northern Ireland) decide to press ahead with an independent approach, we may start seeing some very peculiar consequences within the UK. There’s even little agreement as to whether the recent fuel price increases are directly linked to the June result.

Some believe that the instant fall in the pound/US dollar exchange rate was the cause, while others cite different reasons. So for now it’s business as usual, at least on the forecourt.