Thursday, 11 August 2016

Brexit and its Creative Destruction (by Daniel Staines)

Creative destruction was a phrase coined by Joseph Schumpeter in 1942 and is, in effect, pressing the restart button – breaking down what you have and rebuilding with the purpose of improving on the original. In some ways this is what the recent Brexit vote has initiated – or so we hope.

Schumpeter wrote:
"The opening up of new markets, foreign or domestic, and the organizational development from the craft shop to such concerns as U.S. Steel illustrate the same process of industrial mutation—if I may use that biological term—that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism."

You have to throw out the past and undo the present to facilitate the future.

Whilst the phrase 'creative destruction' might be a paradox, evolutionary 'mutation' is an economic reality. In life, change is the only true constant. In business as in life, if you are prepared and able to manage change to your best advantage, then the sort of changes that Brexit-mongers preach should be seen as opportunity rather than tragedy.

Unfortunately, the press has a need to write stories to engage their readers and as such, there is a tendency to highlight extremes based on flimsy facts, manipulated statistics, 'creative quotation' and speculation. Indeed, as far as Brexit is concerned, it has not only been the press that has released unsubstantiated stories, but the Government, their Advisers and other bodies of otherwise industrial status.

 So what do we as JMS - mere Engineers - what do we do?

We carry on – we take advantage of our ability to rapidly alter direction, to absorb changing circumstances and maintain our ‘can do attitude’.

Presuming that Prime Minister May serves notice towards the end of this year (and the view of many is that this is a big presumption), it will be 2019 before we actually leave the EU. 

So what does that mean to JMS? Well, we don't export so we are not affected by changes in tariffs; our JMS Greece office and colleagues will continue to operate as normal there; the majority of our structural clients are non-bank reliant or already rely on funding from outside the EU (i.e. Turkey, India, China etc.) and our housing developers have already stated their position to continue as normal, having placed several large (500+ unit) sites with us.

A recent paper prepared by Vistage titled ‘Making sense of our current economic landscape -July 2016’, gives factual reasoning on the most likely path for the UK economy in the coming years. The report, written by the eminent economist, Roger Martin-Fagg, is economically explicit (so makes tricky reading). It covers trade and investment balances between the UK, EU and non-EU investors and economies between 1999 and 2014. 

Whilst frying the brain a little, the bottom line shows global confidence in UK stock, witnessed particularly across the 2008 financial crisis. The UK runs a trade deficit with the EU, but a trade surplus with the rest of the world.

Despite headlines reflecting reduced production in the service sector (probably just a 21 year temporary blip), given the weaker pound, unprecedented low interest rates and a continued shortage of housing, plus the fact that we are still a member of the EU with full access to regional funding and grants all point to sustainable growth in our economy ... I personally see more opportunities than gloom.

Over the past two years, JMS has both physically and financially doubled in size. We are in a sound financial position with a full (if not over-full) order book and a strategy for further sustained growth and geographical expansion. 

Both the London office and Chelmsford office have just signed contracts for new, larger premises and the Midlands office is knocking walls down to accommodate more staff. We are growing and we are exceeding our targets. A little European spat is not going to put us off our goal.

Some of you have seen the sign hanging over my desk – Lead me, follow me or get out of my way (based on a quotation from General George S. Patton)

This should be the mantra of JMS – we led the field following the last recession by being pro-active and we will do the same in these unpredictable times.

Back to Martin-Fagg's paper for a minute. He describes economic growth as 'adding value to raw materials and intellect'. He then goes on to say: 'we have almost no raw materials, thus, we must add value to brain power.'

Adding value to brain power, experience to skill and accessibility to talent - it's what makes JMS different. We have a positive attitude driving deliverable goals.

We add value to every project we have been, 
are, and will be equally proud to support.