“A vote of confidence in Britain” is how Business, Energy and Industrial Strategy Secretary Greg Clark described it.
And that’s how GlaxoSmithKline’s £275m investment in three UK manufacturing sites is being reported.
Despite the cloud of uncertainty hanging ominously over the country’s economy, over its trading relationships, over its attractiveness as a place to do business, GSK is backing Britain despite Brexit! Deck out the bunting and put out more flags! Raise your glasses for the loyal toast: the Queen!
Time for some reality pills. Amid all the bluster, it should not be forgotten that just five short days ago data from IHS Markit’s closely watched Purchasing Managers’ Index showed a dramatic fall, to 47.7 in July. It is the lowest level that economic survey has been at since April in 2009. Any reading below 50 indicates economic contraction.
Official figures showed the economy accelerated, growing by 0.6 per cent in the three months from April to June. But that was before the Brexit vote. Those figures were recorded when Britain was a very different place. They represent the last hurrah. It’s time to put the glasses into the dishwater and the bottles into the recycling. The party is over. The next set of data won’t look so pretty.
But, but, but GSK, I hear the Brexiters cry. The same GSK whose chief executive Andrew Witty said an Out vote “would create uncertainty and potentially add complexity for the UK’s life sciences sector” while campaigning for Remain. And he’s still here!
Mr Witty was telling the truth. Brexit has made life for his company more difficult, complex and uncertain. However, set against that is the extraordinarily favourable tax regime that drug companies enjoy in this country, the fact that GSK is investing into existing hubs that it does very well out of, the ability it has to tap into a pool of skilled people to staff them. It might still be able to top up from abroad if the Government brings in some sort of points based immigration system. The sort of people GSK hires should get a lot of points.
It doesn’t hurt that GSK is a dollar company. The pound’s fall makes it cheap for them to invest in Britain, although sterling’s tumble is not an unalloyed blessing.
All of these factors will have gone into the mix prior to the drugs giant pressing ahead with its investment. Mr Witty and his colleagues have clearly decided that there are enough points in favour of their business investing in Britain to overcome the gaping wound of Brexit and it worthwhile despite the issues he highlighted when he went into bat for Remain.
A similar assessment will have been made by US banking giant Wells Fargo, another dollar company, which last week announced plans to buy a new London HQ despite the result of the EU referendum.
However, while there are enough pros to outweigh the Brexit con (and yes the pun is intentional) for GSK and for Wells Fargo that won’t be true for every big company as they ponder their investment plans. Not by a long shot. It won’t be true for lots of medium sized and smaller companies. The forward looking economic data that is starting to filter through tells its own story.
I’m not saying GSK’s investment isn’t good news, and I’m not saying Wells Fargo’s investment wasn’t good news. But the sort of sums they are putting in, while they look good on paper and at the top of Government press releases, are just drops in a very big economic ocean, the tide of which is going out.
That is a bitter pill to swallow, but swallow it we must.
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