Home TypeNews Phil Soar: The effect of Boris Johnson’s biggest legacy on trade shows

Phil Soar: The effect of Boris Johnson’s biggest legacy on trade shows

by Phil Soar

Following Boris Johnson’s resignation CloserStill chairman Phil Soar looks at effect of the biggest legacy of his premiership on trade shows.  

It is now six years since the fateful night of the Brexit referendum. I receive a number of emails about my apparent obsession with Brexit. My counter is that June 2016 was not just deeply economically and socially damaging for the UK, but that it had great consequences for the narrower world of exhibitions. And that is what I write about.

The arguments do not need much repetition. The key is in the name – trade shows. One way or another, our business (72% of UK exhibition turnover in 2016 was trade shows) is about trade. In 2016 some 52% of the country put a cross beside a campaign which said: “Let’s reduce trade.” Full stop. We were part of the biggest trading block in the world – 500 million people. We had free trade, no tariffs, no bureaucracy. A single market. The EU was (and still is) our largest trading partner. The Brexit vote was – arguably above all else – a vote to diminish trade. And hence, inevitably, a vote to harm shows about trade.

The country voted to damage trade shows

I hope it is not condescending, but I do not believe that the 52% ever understood this. But that is what they voted for. Sometimes you have to call a spade a metal instrument for turning over soil.

I know very few people (four to be precise) who admit to voting for Brexit. I have never met anyone in our industry who admits to it. This is not a surprise – why would you vote to damage your own career and business? You might as well assume that pilots would vote to crash planes or railway workers would vote to prevent people travelling on trains (on second thoughts)

If you voted for brexit –why?

But if you do work in our industry, and you did vote for Brexit, I would be delighted for you to get in touch. Tell me why you voted that way and how well you think it is all going six years later. Email Emily and we will print your comments – promise.

The FT produced one of its excellent economic analysis pieces last week – The Legacy of Brexit. Let’s pick a few headlines.

Firstly, don’t hide behind Covid. Every country suffered from Covid, and excess death rates in the major economies were comparable (the US is the highest of major countries). So these analyses compare the UK with the other major economies – generally the OECD top 20. This eliminates any Covid effect. It is also easy to compare what has happened in France, Germany, Italy and Spain with the UK since 2016 – all have had comparable histories with the sole economic exception of Brexit

According to the OECD and Economic Policy Research, the UK has and will have the lowest growth rate of the 20 largest economies 2020-2023. With the exception of Russia it is likely to be the only economy which will go backwards in the next year.

Russia’s is the only economy doing worse than the UK

Business investment in 2022 will be 9.4% below the level of 2016. (Then CER says it will be worse, 13.6% lower). The UK is the only economy (excepting Russia again) where investment has not grown at all since 2016 – and at this point is showing no signs of when (or if) it will ever return to 2016 levels.

Food prices in 2021 were 6% higher than they would have been purely because of Brexit (a number established by direct comparison with the remaining 27 EU members) – obviously they rose by more than 6% because of other inflationary pressures.

Overall, consumer prices are 2.9% higher than they would have been in 2022 if there had been no Brexit. This is a core reason why UK inflation will be higher than elsewhere.

Sterling’s collapse has not helped exporters

Sterling is now more than 20% below where it was the day before the referendum (it fell that far almost instantly). A falling exchange rate has two normal effects. Imported goods are more expensive – which we are seeing and this obviously contributes directly to inflation. Oil is denominated in dollars – so we are paying 20% more than we would have done if our fellow citizens had voted the other way. But usually a lower exchange rate translates to an increase in exports as home made goods (like cars or whisky) are cheaper to produce in Euro or Dollar terms and thus should gain market share elsewhere. This effect has not happened – there has been no increase in the value of exports.

LSE tracks the number of buyer-seller relationships across the EU (ie when one buyer buys from one seller). This number increases in a normal year and has done so for all EU country pairs. But for the UK, the number of transactions between buyers and sellers has fallen a massive 30% since 2016. We all know why anecdotally – paperwork, paperwork, bureaucracy, tariffs, complex VAT rules, 20 mile jams at Dover. One third of our transaction relationships have disappeared – and this must surely lead to fewer buyers and sellers at UK exhibitions. It is almost perfect proof of the material decline in trade.

The economically best performing part of the UK from 2020 to 2023 (projected) is Northern Ireland, the only part still in the EU single market.

We now have the largest trade deficit in our history

On I July the Government announced that the trade deficit to March 2022 was the largest ever recorded in the history of the United Kingdom. Basically, imports exceeded exports by 8.3% of GDP – a figure never seen before in the country’s history. The rapid collapse of exports – which is cause of this number – has mainly occurred in the last two years since the UK left the single market. This will further damage confidence in sterling and the UK, which will lead to higher import costs (as we have to pay 20% more in sterling than we did pre-Brexit), which will lead to higher inflation, which will lead to a deeper recession and who knows what disruption. 8.3% is – believe me – a truly terrifying figure.

Immigration is now at higher levels than pre-Brexit

Let’s talk about immigration – which much research says was the single most common “reason” (we are being kind in using the word reason) for individuals to vote for Brexit. Post 2016 there was a small fall in net immigration as EU citizens left the UK (the total number of entrants grew – the net balance was lower because far more people left than in earlier years). Net immigration fell from 331K in 2015 to 270K in 2019 (no doubt accompanied to great cheers from behind the Red Wall). But the annual number of net immigrants has now increased annually to above where it was in 2016 – so why are we not seeing protests in Whitehall?

For the record, in the year to March 2022, there were 277K work related visas granted (50% higher than 2019), 466K students visas (nearly 100% higher) and 302K family visas (circa 40% higher). That’s just over 1 million new official visas in the 12 months to March 2022 – and this obviously doesn’t count illegals and inflatables crossing the Channel. Just 2,700 immigrants/asylum seekers were deported in the same period. Well, that’s working out well then.

But the greatest visible effect is on the size of the economy and tax revenues.

The economy is already 5.2% smaller – and worse to come

The Centre for European Reform calculates that the economy is now some 5.2 % smaller than where it would have been had we not had the economic suicide-vote. OECD calculates slightly less at 4%. There are a mass of effects of this, but one major one is that reduced economic activity directly reduces government tax revenues (5% less VAT etc). By around £40bn a year less tax revenues at the moment. That £40bn would allow the government to knock 6% off income tax alone. And this isn’t one year – it grows every year. The recent rises in NI, corporation tax etc are a direct result of this £40bn hole. The gift of Brexit just keeps giving.

So what, you might say if you are a Brexit voting employee. We have taken back control – as we can all see in Boris’s impressive performance. If you are such a believer, I would truly be delighted to hear from you. To hear the counter argument. Why Brexit has been good for Britain and, in particular, for our industry?

So what are the consequences for the exhibition industry? This is about exhibitions in the United Kingdom – not the rest of the world.

The long-term consequences of Brexit for our industry

  • The first consequence is the most obvious. The trade show industry in the UK is going to be smaller than it should have been. This doesn’t mean that it is collapsing, or getting smaller. But there is less than there would have been. It doesn’t mean no shows will grow, nor that there are not great ideas which will work in this economy. But the UK will be to Europe as the Irish trade show world is to the UK. Some sectors will continue to grow – healthcare most obviously, and perhaps broad IT – but not in the way we would have predicted in 2015. Another qualification – if the companies which are talking about abandoning/rejecting the subscription model do so, then some shows will axiomatically be smaller. This should create opportunities for new launches.
  • The great bulk of our West London based industry is now truly non-national. Informa and RX may be UK domiciled, but have anything but a UK orientation. Informa, while retaining some shows like IFSEC and KBB, has largely checked out of the UK. Clarion and CloserStill are owned by US based massive private equity companies. Tarsus is domiciled in the UK but has no local interests and has a multinational owner. Hyve, its Russian business having collapsed, is a far more UK orientated company than it once was, and it is quoted on the UK market. But it hardly looks to the UK for its future.
  • All of these companies have something obvious in common. They are well funded and generally well run, but their horizons are the world, not the UK. They will invest and launch and buy where the potential is greatest – and bottom of that list is now the United Kingdom (OK, Russia may be lower).
  • I believe the UK trade show industry will soon recover back to close to its 2019 size – let’s argue for 2024/2025 once the recession and this comedy of a government has washed through the system. But it will be more of a provincial business than it was before. Non-UK visitors never made up a large percentage of our attendees – but they will get less. All of the consequences of Brexit that the FT outlines are already leading to far fewer trade and business interactions with Europe. That will be reflected in non-UK attendance numbers at trade shows.
  • Mike Rusbridge and Nick Forster, in building Reed to be the largest organiser in the world with some 700 events, were limited in their ability to grow organically. When you are that big, in so many sectors, and in so many countries, you are effectively a proxy for world GDP. If the world economy is growing at, say, 4% – then you cannot reasonably expect to be growing much faster. The same is true of the whole UK trade show business – we are effectively a proxy for the gross domestic product of the UK. Some shows will grow, some will decline – but overall we will grow at around the same rate as the UK economy. So if, by 2025, the UK economy is 6% smaller than it would have been if the Brexit vote had been 48 to 52 rather than 52 to 48, then our industry will be around 6% smaller as well.
  • This does not mean that the industry is declining – merely that it will have grown 6% less than it would otherwise have done. It’s crucial to understand that this does NOT mean your show will be 6% smaller. I think we already see clear signs of some organisers scaling back, of abandoning shows which last ran in 2019. It is likely that the 6% shortfall will be made up by a number of shows which disappear, rather than the majority of shows being smaller.
  • We like to think we are masters of our own destiny. In most respects we are not. We cannot escape from the great sweeps of history, nor the random and illogical events which mould our futures.

I must confess that I am reluctant to make any general projections for consumer shows – perhaps someone far better placed, like Rob Nathan or Lee Newton, could do that?

It is now six years since the madness of that June night. It was always going to take time to be reasonably sure what Brexit would mean – though, in truth, the consequences are pretty much exactly as predicted by sensible commentators. For the trade show business, we will probably be some 6% smaller than we should have been. In the long term, investment in our business (which always takes time to work through) will be much smaller than it should have been. But we have taken back control.

 

 

 

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