Perspective on: the political backdrop

By Leigh Bramall, Director

The political environment looks set to continue the febrile theme we witnessed in 2016 and the first half of this year. As we progress ever closer towards Brexit becoming a reality, there are signs that nervousness and caution among investors is growing. Equally as concerning is the uncertainty emanating from our own UK Government. With a weakened prime minister and a split in Cabinet on Brexit direction, the policy positions of the UK Government seem fragile at best.

In the North of England, we now have our first elected mayors for City Regions. Nationally however, despite re-affirmations of a commitment to the Northern Powerhouse, actions have spoken louder than the lukewarm words. The Government’s commitment to Cross Rail 2 came at the same time Chris Grayling seemed to be blowing distinctly cool (if not cold), on Northern Powerhouse Rail and announced a backtrack on electrification of the Midland Mainline.

The combination of a focus on Brexit, at the same time as a cooling on the Northern Powerhouse, reinforces the view that the case to government for investment outside London is never definitively won. It requires constant pressure. The case for pressing national government for investment to boost growth, and good policy locally to drive innovation and development, is clearer than ever before.

A good public affairs strategy will be extremely valuable in helping developers, investors and public institutions alike to strengthen their case.

The political environment can often influence the success of developments. An example is the trend of universities investing in their estate to compete nationally and internationally. Universities are becoming more prominent in driving local economies, playing a leading role in public-private partnerships. However, as highlighted by Brexit, divides can exist between elite institutions and significant sections of the wider public. When universities do expand, these dynamics need to be understood and addressed carefully and strategically.

In our experience of working with universities on their capital estates programmes, we have delivered strategic, thoughtful and robust stakeholder engagement and public consultation. This involves engaging a wide number of stakeholders such as university employees, local MPs and councillors, community and special interest groups and the media, to increase awareness, understanding and support for the programme.

What the Queen did – and did not – say at the State Opening of Parliament

The Queen’s speech may have been light on content, but it doesn’t make that content any less important.  Unsurprisingly, it was dominated by Brexit bills as the UK starts to define the laws that will govern its exit from the EU. This sense of focus on Brexit was heightened by the removal of several more controversial key Tory policies, indicating both the relative weakness of the Prime Minister’s position in her party and the ongoing negotiations with the DUP to establish a majority.

On Brexit, May is looking to maximise certainty for British businesses and reduce the burden on the UK government of managing the process, by effectively copying and pasting EU Laws into UK Laws and cutting out the bits she doesn’t like. This sounds simple enough. However, the relationship between EU law and UK law is complex, and interwoven, built up over more than 40 years.  One thing is clear – her position in many key areas hasn’t softened. A bill will legislate for the end of free movement from the EU with an indication that only those with high skills, or those in most demand – the ‘best’ and ‘brightest’ – are allowed into the country.

Other Brexit bills include:

  • New nuclear safeguards, with plans for regulation from the UK rather than EU
  • Measures towards an independent trade policy

There were signs that the Government intends to refocus Britain back towards advanced technologies in the wake of Brexit and the financial crash.  Bills to enable commercial spaceflight from the UK and the expansion and regulation of automated and electric vehicles hint that the Government is serious about its Industrial Strategy and cementing the UK’s place as a leading location for the development of these technologies.

Equally, the turbulence and volatility of both Brexit and a hung Parliament do not seem to have undermined the Government’s commitment to invest in HS2.  Powers to build the second phase of the high-speed rail line were included, fast-tracking the ability to deliver the western leg up to Crewe, bringing HS2 within touching distance of Manchester ahead of the original schedule.  Significantly, the Bill included powers to compulsory purchase the land along the new routes required to build HS2 – a crucial element needed to physically deliver such a complex project. These moves should reinforce confidence that the Government still intends to deliver on at least this element of high speed rail for the UK.

Given the dominance of Brexit in the UK Government’s consciousness, it seems incredible to think that we had never heard of Brexit two or three years ago.  But a year is a long time in politics.  It remains to be seen whether Theresa May will still be referred to as the Prime Minister long enough to implement many of the Bills she proposed yesterday.

Will May’s gamble deliver a better Brexit?

Brexit, Trump and a Hung Parliament.  What the business, development and investment community crave is stability.  Yet, as the ripples of the Brexit vote and financial crisis continue, we have precisely the opposite.  Many have questioned the election result. There is a narrative that explains it though, demonstrating that the societal trends exposed by the EU referendum hold true.

Theresa May built her campaign around the ability to force through a hard Brexit against EU negotiators. In doing so she failed to acknowledge two key points revealed by the very vote that made Brexit a reality.

Turnout for the 2015 general election was around 66%, yet for the EU referendum it was over 72%.  That equates to an extra 3 million votes.  In other words, a good number of non-voters in 2015, voted in the 2016 EU referendum.  Who these 3 million are matters.

Younger people from prosperous areas are typically more pro-EU and on the left, yet over recent elections, the young have been far less likely to vote.  It’s likely that part of the extra votes in the EU referendum came from these younger, anti-establishment remain voters. In deprived areas, election turnout is often low, yet support for Brexit was high.  So, it’s likely that part of the extra 3 million in the EU referendum came also from deprived anti-establishment leave voters.

Fast forward to the recent general election and turnout was 68.7%: around half of the extra 3 million votes cast in the EU referendum fell away.  Yet almost half – around 1.6 million – voted again.

Theresa May’s campaign message to deliver a strong Brexit ensured the younger anti-establishment ‘remain’ voters turned out once more against her. What May also failed to recognise was that much of the anti-establishment ‘leave’ vote would revert to not voting.  Add in May’s U-turn on social care, no-shows at TV debates, and a better than predicted Labour performance and you have the result.

For business, the outcome tells us a few things: the tensions between the haves and have-nots aren’t going away – we need the right skills system to help business and young people from all backgrounds to succeed. The result will probably see a more conciliatory approach to Brexit negotiations and access to the single market, better for local manufacturers who export to Europe.

We are unlikely to see an end to uncertainty, which will risk delays to investment – this could be damaging. Finally, we live in a febrile world – for the investment and development community, thoughtful consultation, engagement and communication with stakeholders and communities is more important than ever in ensuring developments go ahead.

Leadership cannot come from government alone

Tasked with writing a column before the general election, knowing that by the time it is published the results will be in, is no easy business. The latest blog from our MD Alexis is the result of such a challenge. Here he explains that, regardless of the election result, private sector businesses need also to step up to a leadership role.

Putting a newspaper together is a complicated business. Columns like mine often have to be written a week in advance. That is a challenge this month as I want to write about the result of the general election before the election takes place. I am not about to make any predictions but I know one thing for certain. The voice from local business needs to be a strong and powerful influence on whoever is elected.

Leadership cannot come alone from our politicians. The government is facing unprecedented financial pressures. Whether you are in favour of more or less public spending you cannot deny one thing: the amount of debt owed by our country has grown tremendously and continues to grow. Our government spends more than it receives. Coupled with Brexit and the terrible challenges we face around security and terrorism, one thing is clear: any UK government is going to be under pressure from day one.

Business has a vital role to play in sharing the burden. Not just big business but every business, in every town and every city across the land. Business can provide the leadership on those key issues that will shape our economy for years to come. How do we generate more jobs? How do we attract more investment? How do we deal with Brexit? All of these questions can only be answered sensibly if businesses have a strong and powerful voice in the debate.

Politicians need to listen but businesses need to step up and be heard. As ever, Sheffield leads the way. In our own city we have a strong and active Chamber of Commerce. We have the private sector-led Business Improvement District that is investing thousands in improving our city centre. I have recently been involved in setting up the Sheffield Property Association. The first Association outside of London to represent the organisations that own and invest in buildings across our city. Together they invest billions in our local economy and will be a strong and powerful voice to drive investment and economic growth.

The morning after the election all eyes will be on Westminster, but it is worth remembering that leadership needs to come from us all; businesses included.

In defence of Council leaders in Cannes

Last week 25,000 investors and property developers travelled to Cannes in France. They were there to discuss where to invest money to generate jobs and economic growth. They listened to cities and regions who need to attract their investment.

From Bangalore to Budapest, from Copenhagen to Cape Town. Every major city and region on earth was there promoting what they have to offer to investors. Seminars, workshops and, yes, champagne receptions defined five days of discussion and networking.

In recent years Council leaders and business leaders from our region have travelled to be part of this debate. This year Counter Context assembled the largest ever delegation of businesses who were sponsoring our delegation. We promoted over £1bn of investment opportunities. Unfortunately, our political leaders were thin on the ground.

Why were they not there? They have busy schedules, they have responsibilities back home. These are all reasonable explanations. There is also the suspicion they fear being photographed sipping champagne at drinks receptions. This is not an unreasonable anxiety. Voters back home are angry. Many will see a trip to Cannes as a gross waste of public money.

Going to Cannes is anything but a waste of money. Being part of this global network matters. Attracting investment is like finding a job. You cannot sit at home hoping the phone will ring, you need to get out there. You need to have those conversations that turn into big deals. Deals like the multimillion pound investments recently announced by McLaren and Boeing. Our politicians play an incredibly important role in these conversations. They give confidence to investors.

By 2020 our town halls will receive no central grant from Whitehall to fund Council services. This means huge changes to how we fund the services we all rely on. The gap needs to be filled by Business Rates – the tax paid by businesses and investors. Our politicians need to be meeting, talking to and sipping champagne with these investors to show them what we have to offer and to attract them to our region.

There will be many more events that afford valuable opportunities for Sheffield. We need to support our politicians and allow them to do their jobs without the fear of public backlash.

It may not make for a great photograph now but it will fund essential services in the future.

What is the role of the media in this new world of ours?

On the day that MP’s  announce an enquiry into the “growing phenomenon of fake news”, our MD Alexis Krachai explores the role of the media and the role we have, as communications professionals, to work with the media – not against them. 

2016 was defined as the post truth year. Fake news. Viral stories solely available on social media. The latest is ‘alternative facts’.

2 plus 2 does not yet equal 5 but many feel we are heading in that direction. At the centre of this swirling mass of moral, professional and political questions sit the media. The fourth estate. What now for those who work with the media?

Two famous quotes immediately spring to mind. Don’t poke the bear in the zoo and Napoleon’s comment that he “feared three newspapers more than a hundred thousand bayonets”. Many in the media see themselves as being under attack. Here in the UK, a debate swirls around the question of press regulation. Fake news stories are popping up in Germany and France ahead of elections. Across the Atlantic, the very future of a democracy is at stake as President Trump locks horns with what he calls the ‘lying press’.

A media under attack from commercial and political pressures is already fighting back. You can see journalists strengthening their resolve to root out falsehoods. You can sense that the media rightly see themselves as the bulwark that protects against authoritarianism and dictatorship. This is likely to impact consciously and subconsciously on the entire news gather industry. One of the world’s oldest and most noble professions is being challenged and harangued. For any organisation under the watchful gaze of the media, the imperative to be more transparent, collaborative and open will only increase. Journalists will rightly be less inclined to let anyone off the hook.

At Counter Context we have always advised our clients to be open and candid with the press. It is about working with colleagues in the media to build their levels of understanding and trust in what you do. There will always be times when the media will want to report on issues that make us uncomfortable. The key for any company or public body is to understand that keeping the media at arms-length is akin to putting a finger in a dam. You cannot delay the inevitable. Eventually, the moral and legal right to know will prevail. The ability to ask difficult questions will wash away even the most considered PR strategy. If you’re not persuaded simply think about how an innocuous question from a journalist can escalate into a Freedom of Information request.

We see the media as a partner. If they ask difficult questions it will likely strengthen the thinking and decision-making that goes on behind closed doors. Equally, being open with journalists and explaining the challenges often encountered in delivering major projects will help to build understanding and trust. That trust is key and can often result in more understanding phrasing when they decide on their next headline. Staying silent is not an option. It fuels suspicion. Creating a vacuum will leave space for others to fill it with what they want to say.

Ultimately recognise that the media are a massive amplifier that can turn up your message or someone else’s message to full volume. You can either put your fingers in your ears and ignore the noise or you can work with the fourth estate. It is not about manipulating the press. It is about treating them as a partner, a shareholder and one of the most important stakeholders in what we like to call a democracy.

Devolution: deal or no deal?

We’ve been paying close attention to the various devolution deals being offered up and down the country and the mixed receptions they have received. Account Executive Sam Rowe looks at some examples and explores what lessons can be learnt about communication, identity and the politics of geography.

Why devolve?

Some city regions such as Liverpool and Manchester have welcomed the devolution proposals with open arms. The reasons, it seems, are clear. It is well documented that local authorities in the UK are some of the least autonomous in Europe. You don’t have to travel too far outside of London before you hear reference to the ‘Westminster Bubble,’ the idea that those making big decisions aren’t well enough exposed to the rest of the country. It is also true that many local authorities are clamouring for extra funding. With the proposals offering both more powers for local authorities and more money to implement these powers, it seems likely that Councillors would be keen to accept a devolution deal.

This has not been the case on the East Coast, particularly in the regions of Lincolnshire and Norfolk. We have clients with large scale projects in these areas, and so we have followed the discussion on devolution with interest.

A decision must be unanimous between all levels of District and County government in the region. Lincolnshire County Council and South Kesteven District Council voted against the Lincolnshire devolution proposals. In East Anglia a combined authority was proposed to include Norfolk and Suffolk. While every single authority in Suffolk accepted the proposals; Norwich, Breckland and other Districts in Norfolk rejected them. In the final weeks of November, the local media in both parts of the country officially pronounced the devolution dealdead.’

So, why the rejection? The reasons are varied and worth exploring.

Geography and identity

Geography looms large in the decisions to reject the proposals. The Lincolnshire devolution proposals included towns as far south as Stamford, which is just about as close to London as it is to Grimsby. As part of the East Anglia devolution, Norfolk was to be paired with Suffolk, a proposal which was not popular in certain quarters.

These areas have distinct and unique identities, and any attempt to group different locales under one roof has to be done with the utmost care. People often derive their identity from the communities and towns in which they live. Whether you come from Norwich, Ipswich or Sheringham matters. Whether you come from ‘East Anglia’ currently means a lot less. The recent debate among Derbyshire, Sheffield and Chesterfield only goes to highlight this point.

The Mayor Issue

The main reason to reject the deals however, seems to be because of the proposals for elected Mayors. A question quickly arose about the need for yet another level of local bureaucracy in local government along the East Coast. Many people who rejected the scheme voiced their concerns regarding the new position, even those who supported the schemes seemed to be doing so despite, rather than because of, the proposals for a new mayor. Philip Jackson, a member of the Conservative Party in North East Lincolnshire Council, was quoted as saying:

“Having an elected Mayor isn’t the ideal situation but if it’s what we have to do to secure a greater say over our affairs I’m prepared to go along with that”

Judging by this and other responses, the idea of one figure making strategic decisions for the whole of one region, evidently does not sit well with a large number of Councillors.

What can we take from this?

The discussions about devolution that have occurred across the country paint a complex picture. With so much going on in politics, the discussions on devolution have tended to fly under the radar. But it would be a mistake not to pay attention to what is going on. These discussions could shape the biggest reform in local government for decades. They provide a real opportunity for everyone involved in both the public and private sectors to position themselves to get their views listened to and acted on.

Show that Sheffield is open for business

In his monthly Sheffield Telegraph column, our MD Alexis explores the issues, the opportunities and the wider context that affects the city of Sheffield. This month, he writes about the expectations for 2017, after a tumultuous year resulting in Brexit, a new government and Donald Trump.

I did not envy the editors tasked with rounding up the key news stories at the end of last year. What to include for one of the most tumultuous years in the last three decades?

Locally we have seen the acceleration of devolution and the growth of Sheffield City Region. Nationally we have seen Brexit and a new government installed. The election of Donald Trump, who becomes the 45th President this month, has already had a profound effect on politics and economic projections.

What does this mean for local businesses and for Sheffield? It means the world grows more complicated. To create the jobs, attract the investment and generate the wealth that will fund public services will take skill, confidence and imagination.

2016 saw some notable successes. As more cranes appeared on our skyline; residential, commercial and retail developments contributed to the increasing strength and vitality of Sheffield. The government’s decision to bring HS2 to the city centre will turbo charge regeneration in the years to come. The growth of the Advanced Manufacturing Park and the Olympic Legacy Park show we can deliver world-class innovation districts that will power our economy for decades to come.

We have every reason for confidence in 2017. The role of the City Region will continue to be important. We must harness the benefits of devolution whilst ensuring these organisations remain linked to local communities. An elected mayor will be important but we will also have to show every day how the City Region structures are having a positive impact on people’s lives. Building capacity is not the same as building legitimacy.

A mismanaged Brexit will harm our economy but new found freedoms can present new opportunities. Our challenge is to ensure Sheffield presents a compelling offer to investors and businesses. Whilst renowned for digital innovation, advanced manufacturing and sporting prowess, we need to think more deeply about what Sheffield has to offer to the global economy.

In November, the city will host the renowned Horasis conference, attracting hundreds of investors and business leaders from Europe and Asia. This is our opportunity to shine; to offer guests a warm welcome and to tell the world why Sheffield is a compelling place to do business.

We all have a role to play throughout 2017, showing the world that Sheffield is open for business.

The Brexit Plan.

Our Associate Director, Emily Marshall offers a summary and perspective on the Prime Minister’s Brexit plan.

Yesterday at Lancaster House, Theresa May gave her final speech on Brexit ahead of triggering Article 50. This could not have been further from that which, from the same location, Margaret Thatcher delivered in 1988 with the opening gambit: “Europe: open for business”. What we have now heard from May is the ‘Brexit Plan’, a move which has confirmed that Brexit means Brexit. Not a separation period, or ‘let’s see how things work out’, but a full-blown divorce – starting from now.

Any hopes from the 48% remainers or those who voted for a softer leave, for Britain to remain or partially retain being a member of the Single Market, have been dashed by May’s top two priorities:

  1. controlling EU immigration
  2. withdrawing from the jurisdiction of the European court of justice

Some softer Brexiters may have seen potential for a better economic arrangement to retain the free movement of people between Britain and the EU, similar to Norway which receives single market membership in exchange for a financial contribution. However, despite no formal system of control, May has stated that: “Brexit must mean control of the number of people coming to Britain from Europe”. Thus, leaving the 3million non-British EU citizens living in the UK in the dark as to their futures, as well as those British citizens who live and work abroad in the EU.

In summary, May’s Brexit Plan includes the following:

  1. A warning: May said that EU leaders would be committing an act of “calamitous self-harm” if they tried to punish the UK for leaving.
  2. Deal or no deal: May would prefer no Brexit deal than accept a bad Brexit deal, suggesting her openness to carry on trading with the EU on WTO terms in spite of a EU trade deal.
  3. Have your cake and eat it? May ruled out Britain staying in the single market but wished to retain the “greatest possible access to the single market”.
  4. Avoiding the cliff edge: In an effort to protect businesses, May has said she wants a ‘transitional deal’, something the Labour Party will be pleased to hear.
  5. Pocket money: May has made it clear that the days of Britain making vast contributions to the European Union every year will end. She has caveated that: “there may be some specific European programmes in which we might want to participate and, if so, and this will be for us to decide, it is reasonable that we should make an appropriate contribution”. It is a savings scheme, which some will see as impractical, if not impossible, given the interdependence the nations of the EU have to support our farms, fisheries, medical and scientific research and beyond. This also extends to education where withdrawal from the single market will result in cutting the numbers of EU students by over 30,000.
  6. What next? May confirmed that the final deal that is agreed between the UK and the EU will be put to a vote in both Houses of Parliament.

As for businesses, the Institute of Directors welcomed the “level of detail” provided in May’s speech:

“We now know that we will be leaving the single market, and while there will be firms who regret this, they will at least be able to plan on that basis.”

On a pragmatic level, we are now clearer than we were yesterday on May’s Brexit plan, her priorities and hard lines. But whilst we teeter over the infamous ‘cliff edge’ we do not see that the Brexit Plan announced on Tuesday will provide any more clarity or confidence to businesses and decisions made by their investors until the negotiations start to crystallise over the next two years. It is without a doubt that British business and those who look to support it remain unsettled by the process that is about to unfold.

With the certainty of change ahead, there perhaps is an air of ‘Keep Calm and Carry On’. The pound is on track for its best day against the US dollar since 2008 and as Adam Marshall of the British Chamber of Commerce rightly points out: Brexit “must not become all-consuming.”

With that we remain focused on promoting benefits and opportunities for British business in the schemes and projects we are involved in and to carry on driving forward to meet our clients’ commercials and strategic objectives here in UK and further afield, as well as our own.

Autumn Statement Highlights

On Wednesday 23 November, Phillip Hammond delivered his Autumn Statement. Our Associate Director Emily Marshall explores and interprets some of the details and main points to consider. 

In what was the Chancellor’s last Autumn Statement, it’s all about #Jams and Britain’s Brexit Big Black Hole. Whether the Chancellor of the Exchequer has a sweet tooth or interest in confectionary, we won’t know. Perhaps he needs a sugar boost to rebalance what surely would have been a dip in blood pressure when borrowing an extra £122bn in the wake of the referendum result.

Boosting spending on infrastructure and productivity as well as the string of small measures to help ‘Jams’ were key takeaways from yesterday’s Autumn Statement.

Since the 1980s, public investment in infrastructure in advanced nations has gone from 4% to 3% of GDP. Today, the UK Government announced a new national productivity investment fund worth £23bn to focus on innovation and infrastructure. The figure was surprisingly lower than expected owing to the somewhat enormous budget deficit but still shows a clear commitment to UK infrastructure investment in response to boosting economic growth.

Indeed, the trend in infrastructure investment to boost national economies can be seen across the world. In the US this phenomenon has a name: ‘The Trump Factor’, and means using infrastructure to rebuild your investments. It is a populist measure that President Trump and Prime Minister Theresa May share: rebuilding the country’s infrastructure with deficit spending that will (according to John Maynard Keynes) produce a multiplier effect on growth. But today’s budget presented by Phillip Hammond showed a more cautious boost than expected. In his Autumn Statement, Hammond has committed to:

  • £23bn to be spent on innovation and infrastructure over the next five years
  • A new £2.3bn Housing Infrastructure Fund for up to 100,000 new homes in high demand areas
  • £1.4bn to deliver 40,000 extra affordable homes
  • An extra £1.1bn invested in English transport networks, including rail networks
  • £220m to reduce traffic congestion (‘jams’)
  • £110m for East West Rail and commitment to deliver Oxford to Cambridge Expressway
  • More than £1bn for digital infrastructure
  • Investment in R&D to rise by £2bn a year by 2020.
  • Mr Hammond stated he will be prioritising high-value investment in infrastructure and has written to the National Infrastructure Commission asking for proposals for spending in the next decade.

This is still good news for sectors in the built environment amidst difficult times, particularly following uncertainty in the wake of Brexit and waning investor confidence. With a series of planned infrastructure investments ready to be deployed, these industries and the supply chain of services, consultants and advisors who support them will need to act quickly out of the starting blocks.

With this burst however, we should be prepared to meet the usual challenges. Infrastructure projects are large and capital intensive, with significant upfront costs and benefits that start to be seen over the longer term spanning several politicians’ professional lifetimes and being met with the public’s concern of: ‘What’s in it for me?’.

Both nationally and locally, new infrastructure projects are contentious. We may all see the demand but such economic arguments for new infrastructure are often met with populist concerns, which need to be carefully and effectively considered.

An anti-climax could perhaps be felt for the Northern Powerhouse, given the positive attention it has received from Theresa May and her Government recently. In his brief address to northern businesses, Hammond stated that for too long investment has been focused on London and that “Government will publish a strategy to address this”. He was firmer however in city regions getting individual budget powers in the Government’s approach to devolution.

In summary, whilst Brexit’s Big Black Hole has rather dampened the size of new investments, there is now the mood for greater infrastructure investment and we should all seize this opportunity.