Recently I attended Kroll’s annual restructuring conference in London and the headline speaker was the legendary broadcaster, Andrew Neil.
He gave a great speech with a mixture of his thoughts and stories, all with his usual great sense of humour and wit.
He was giving his views on the global macro issues and how they would impact businesses and their leaders in the UK.
It is fair to say the tone was a downbeat and cautionary one. He did start by saying that after he reviewed his prep, he did realise it was of a pretty negative and downbeat nature, and thought about mixing it up with more positivity, but decided that we could handle the truth and he was not going to sugar coat it.
It must be said though that Andrew really does know his history and he weaved historical facts and events in at every turn.
Not surprisingly Mr Trump was at the centre of everything, both in global terms and then how it impacted the UK and whilst his view was that generally Trump was not following any sort of planned strategy, he could link some of his actions to those taken by previous presidents (not those in living memory though) and other economists. However, in virtually every case, the outcome in the past was not favourable, and it was his view that history would judge it the same.
He felt the combination of the on-off-on-off tariff situation, the plan to try and bring manufacturing back to the US and to reverse the so called trade deficits with the rest of the world, had the real potential to cause a big recession in the US and then potentially the world. When Trump took office the average overall tariff from the US was 2%. It is currently 22% although of course this could change by the minute so I would imagine it is out of date even whilst I am writing this!
He spoke of a stat that the US produces 25% of the world’s GDP but amazingly this figure has remained the same for decades. Whilst the rest of the world and in particular Europe has seen its share decline continually due to the rise of the Far East, the US has been able to maintain its share of the world’s GDP.
Interestingly he said that whilst many might look at the upcoming Trump years as just a period to get through and out the other side, he felt it might not be as simple as that. Vance could well be lined up to be the next president and carry on where Trump leaves off (President Vance does not have a great ring to me!!) and this whole strategy of moving away from Europe, being closer to Russia and allies becoming former allies could well be just the sign of things to come, and the start of a totally different world and one in which Europe would have to stand on its own, without the USA and the same would be said for the UK, which has always been the closest ally to the UK in Europe, but maybe no more.
Therefore, we cannot just put in a diary note for 4 ½ years’ time and expect things to then change back. This COULD be the start of the biggest change in 80 years and could become the new norm, and then how do we all as business leaders deal with that.
In terms of the UK, he felt we would at some point have to make a choice, move closer to the US but that means the new style of US, or closer to Europe. His view was that the US was much better for entrepreneurial spirit and has the biggest companies to work with, and in normal times he would favour the US, but now you must consider it is the new Trump style US and all that this entails. The other option is to be closer to Europe, but his view was that it was too disparate, very little entrepreneurial flair and too much infighting and political turmoil. So, he felt neither option was great but at some point, the UK would have to choose. It could not do both!
All of this provides huge uncertainty to the politics of the world and to global trade and to the global economy. As this is not part of an overall strategy that everyone can see how it will play out, this creates even more uncertainty as to how to deal with it.
The message I think is therefore to expect continuous change and there will be a need to be agile. I don’t think anyone can put their head in the sand and ignore it, so deal with it head on and expect the unexpected. Hopefully that has not depressed everyone. I am writing this on the train after the conference so doing so with a glass of wine to soak up the misery!!