13 March 2017 | Graeme Davies
Never mind the seemingly semi-permanent concerns about straitened government budgets and low-growth economies in the UK and Europe, FMs who operate internationally have new headaches now as the impending Brexit negotiations and the advent of Donald Trump's protectionist rhetoric in the US throw up some huge strategic issues.
Both the UK's withdrawal from the EU and Trump's accession in the US could unsettle international businesses. First, the unknowns about UK access to the single market, and indeed many other global markets given the need to negotiate trade deals around the globe, might already be affecting investment decisions by companies.
A so-called 'hard' Brexit, which sees the UK withdraw from the common market and also abandon the principle of the free movement of workers, poses big issues for companies who both operate in Europe and employ EU workers. If nothing else there is likely to be a hike in the cost of operating across the continent. For UK firms there might be the added risk that such extra costs could make them less competitive when coming up against EU rivals.
So far the Brexit effect has been negligible for the UK economy. The slide in the value of sterling has given UK businesses that transact abroad a boost as their products and services have become cheaper. But the latest output figures from the services sector suggest a slowing of growth, and firms are also contending with returning inflation, both through wages and input costs - especially if those inputs are priced in overseas currencies.
Across the pond, uncertainty has arisen with Trump's 'America first' mantra. All the signs from his early policy pronouncements point to a protectionist America in terms of trade but also with an avowedly pro-business stance at home. For businesses operating in the US there could be benefits as business regulation is likely to be relaxed and taxation could shrink, but so could their supply of relatively cheap labour, a key component for many FM businesses.
It is early days in the Trump presidency and so far stock markets in the US are enjoying the ride, soaring to record highs and renewed confidence and a strong dollar could lead to more overseas mergers and acquisitions activity.
Graeme Davies writes for Investors Chronicle