Dr. Mark Cassidy:

Whether the outcome is a hard or a soft Brexit will have an impact on the amount of foreign direct investment we are likely to see here. We still expect to see some more foreign direct investment even in the event of the softer Brexit scenarios. There are two reasons for this. First, the choice of a hard Brexit or a soft Brexit has a smaller impact upon trade in services. Once Brexit takes place, whether it is hard or soft, there will no longer be passporting of services between the UK and the rest of the EU. Under all circumstances in which Brexit takes place and the UK is not a part of the Single Market, the incentives for foreign direct investment to locate here will still exist, particularly in services. There will still be a benefit under both circumstances.

With respect to goods, there will still be barriers to trade as long as the UK is not in both a Single Market in which there are no regulatory checks and a customs union in which there are no customs checks to enforce rules of origin, even in a free trade agreement. UK goods exports still will not have unrestricted access to the EU. These restrictions will be smaller in the case of a deal than in the case of a no-deal outcome with tariffs and the like. In summary, we expect to see more FDI flows under all circumstances, but the incentives will be even greater in the event of a no-deal outcome.

In regard to timing, the scenario in which there is a deal, which we still think is the most likely, involves a transition period up to 2020. That allows firms a lot more time to prepare their investment strategies. I certainly do not see any benefit in the no-deal scenario, even in foreign direct investment. The suddenness of the change in arrangements will lead to uncertainty and a decline in sentiment right across the economy, including in exporting sectors. More disruptive and bigger changes in the trading arrangements will add a lot more friction, trade costs and the like. We would benefit in terms of FDI in both circumstances, but I do not see any silver lining in a no-deal outcome.