United Kingdom: investment falls victim to Brexit

Investment in the UK has slowed ever since the 2016 referendum. Given the total lack of visibility, many firms opted to defer capital expenditure. Others chose to start up or relocate activities in other countries, it being very difficult, in the run-up to Brexit, to have any clear idea as to the marginal efficiency of capital. To this day, it remains impossible to predict what type of Brexit awaits, even when it will happen exactly. Investment is and will remain one of the main victims of all these uncertainties. More and more firms are triggering their contingency plans. Airbus envisages drastically curtailing its investment programme in the United Kingdom if it crashes out of the European Union without an agreement. The spectre of a no-deal Brexit would have to vanish definitively for investment to rebound (all other things being equal, which won’t quite be the case as global growth is slowing). A postponement of Brexit would be false good news, while a ratification of the Withdrawal Agreement would be slightly more favourable to investment, though this would not shed any light on future trade relations between the United Kingdom and the European Union. Finally, no Brexit would be by far the best scenario for firms, even though two-and-a-half years of uncertainties are bound to have left their imprint. However, walking back Brexit (by revoking Article 50 or holding a second referendum) is not the most likely scenario.