It's two months after the Brexit vote, and the financial damage is continuing. According to Reuters, New York just passed London as the number one place for foreign investors to put their money into commercial real estate. The image of London and England has definitely taken a hit.
Not all doom and gloom
Of course, any time an economy takes a punch, there are gains as well as losses. Nature has a way of evening things out, but a clearer picture of the longer-term effect is not likely to appear until October when the GDP is officially measured. As one might expect, there are some positives that result from the negatives. Since the pound has tumbled against the euro and dollar, tourism, exports, and retail sales have increased. The deficit is smaller than at the same time last year.
What has gone down?
Unemployment has skyrockted. Inflation has edged up a bit, but is still at low. As stated above, the pound has gone down relative to the Euro. Much of the data points to a shrinking economy and a likely recession. Much of this has been caused because of failed marketing of the Remain forces.
Pro-Leave forces created messaging everyone could understand
In analyzing the vote, the Financial Times found that of the 100 key social characteristics associated with the Remain vote, the two that correlated most strongly were education level (college degree) and occupation (professionals). The Remain advocates used more economic and rational messages that appealed to this group. The problem with economic and rational arguments, unless they are crafted really well and consistently repeated, they are more difficult to get into the brains of a wide segment of voters. The pro-Leave group focused on messages that appealed to white working class and rural voters that everyone could understand - halting immigration and preserving traditional British culture. If you are seeing parallels between the pro-Leave group and pro-Trump supporters in the US, you are not alone.
There was also a definite geographic component to the vote. Remain won in Scotland, Northern Ireland, and greater London. Most of England and Wales voted to Leave. The problem this presents for the UK is that Scotland and Northern Ireland, because of their votes, may want to break away and remain in the EU. There is a precedent for this since Greenland withdrew from the EU after getting a degree of autonomy from Denmark in 1982. Of course, similar to the regrets of a number of Leave voters, there is talk of Greenland rejoining the EU for economic reasons. Perhaps the Leave group should find out why the people in Greenland have changed their minds.
The damage is done
The shift in commercial real estate investors from London to New York is just one indicator of the brand damage from Brexit. The uncertainty it caused has made people more nervous about investing in the UK. This combined with negative interest rates in many parts of the euro zone are likely to continue to drive investment to the US. Of course, US elections are coming up. A negative result (depending on your political point of view) could cause brand damage here as well.
Repairing a damaged brand
So what does the UK need to do to repair its brand damage? Essentially, it needs to market the positives and limit the scope of the negatives. It needs to position all things British as good deals that are less expensive. It needs to reduce the fears about investing in the UK, and it needs to create a plan to show the world that it will continue close ties and financial relationships with the US and the Eurozone.
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