A Word from the Editor - August 2018

Alex Lock, DAC Beachcroft LLP
Wednesday, August 1, 2018

It is always useful to look back now and again, to remember the things said and done, and reflect on what has changed and what has been learned. Every now and again I go over editorials I have written previously. Sometimes it is to see if I am simply repeating myself, sometimes to see how wrong my predictions were. I took the opportunity this month to look back 12 months and see what was important then and how things might have changed. Apart from the weather – which then seemed to consist of hailstones, rain and flooding in Cornwall – not an awful lot has changed.

The sense of a greater protectionism creeping in has gone from a feeling to a reality. We are at the start of various trade wars. The US and the EU and the US and China are all imposing ever-higher tariffs on each other’s manufactured goods, to the tune of a total of some $400bn. Forget the fact that the US’s trade deficit with China reached its highest level after the tariffs were imposed, it is the knock to confidence that will have the greatest effect. If there is a slowdown in investment, is likely to be damaging to many economies but the effects will be harsher for those that are perceived to be more vulnerable or less stable.

Next up was Brexit and the uncertainty that went with that. Last August there was a lack of clarity about what the UK was seeking in terms of a long-term, viable arrangement with the EU. This August, well … you can make a judgement for yourself as to where we have got to in terms of clarity. Many politicians have been vocal in their desire to maintain, strengthen or enhance protections for workers, despite the fact that the UK is leaving the EU next year. With a comprehensive agreement on trade and access with the EU, this is a commitment that the UK would have difficulty in not maintaining. The EU would be unlikely to tolerate a close trading partner having access to the single market, but to undercut labour standards (for which read reduce costs) to below that which all other countries within that market are subject to. At present, however, there is no certainty about what arrangement the UK will have with the EU, over and above World Trade Organisation tariffs.

There is a danger that in a more uncertain world, investors will be more reluctant to invest and where they do they will look for security and stability. Where there is uncertainty and instability about future regulatory and trading arrangements, this may make the UK look less attractive.

In turn, that runs the risk that in order to counter that particular unattractiveness, something needs to be put in place that would appear to be more attractive than what other economies offer. This is about regulation. It may encompass the stringency of anti-money laundering regulation, or the level of environmental protection required. For our purposes it may be about employment and labour regulation. For most businesses their highest costs and greatest risks relate to the people they employ. If one was seeking to offer something positive to counter uncertainty and instability, that is where one might look.

While it is easy to be critical and pessimistic, employment law is an area in which there are reasons to be so. Governments, in the past, have cut protection under the guise of reducing the burden on business, or dealing with frivolous claims as part of a programme to make UK plc more attractive for business investment.

It seems fitting to end, as I did a year ago: ‘Perhaps ministers and opposition politicians will have time over the summer to reflect on the problems identified and the reassurances they give and that those will translate into proposals and solutions.’

Alex Lock, DAC Beachcroft LLP

The legal content in this article is believed to be correct and true on this date.