Finance

Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.

The hectoring tone of Brexit-loving Tim Martin, chairman of pub chain JD Wetherspoon Plc, will be familiar to anyone who has spent time pinned against a bar listening to a late-night rant.

As an outspoken fan of the U.K.'s planned departure from the EU -- that is, provided migrant labor doesn't dry up -- Martin likes to make his views heard on a regular basis. Wetherspoon's latest trading statement was no exception. Blasting "gloomsters" who warn of the harm of a no-deal Brexit, Martin singled out Carolyn Fairbairn, the head of the CBI business lobby group, and told her: "Put a sock in it."

British CEOs should pay no heed to Martin, whom the CBI rightly accused of "slinging mud" while ignoring the economic risks of Brexit. Businesses would be doing their customers, employees and shareholders no favors if they kept quiet and just watched as the government, shorn of its parliamentary majority, starts the clock on a two-year negotiation with Brussels that has both sides already at loggerheads.

If anything, CEOs should be encouraged to speak louder.

As Martin's diatribe against "gloomsters" shows, it has been difficult over the past year to warn against the economic consequences of a hard Brexit without hitting several obstacles: economic data showing Britain in fine fettle, a government dismissive of companies' concerns and a population that shrugged off dire economic warnings the first time around when voting to leave the EU. Some lobby groups have watered down their post-Brexit wish-lists.

Spender Slowdown
Quarterly GDP growth, U.K.
Source: Bloomberg Intelligence

But the picture is changing. Economic indicators are worsening: First-quarter U.K. GDP growth was worse than expected, with rising prices and stagnant wages squeezing consumers. Second-quarter growth could be a mere 0.2 percent, according to Bloomberg Intelligence. The post-referendum boost to the U.K. stock market from a weaker pound is fizzing out: The FTSE 350's 4 percent rise this year trails the 9 to 10 percent gains in Paris and Frankfurt. Expectations for U.K. corporate earnings have been flat since May, according to Deutsche Bank.

Running on Empty
Blended forward 12-month earnings-per-share expectations, normalized
Source: Bloomberg

The political situation has also changed in the wake of the Conservatives' dismal performance at the ballot box in June. Without a majority, the government will now have more reason to listen to CEOs' concerns -- giving company chiefs a greater impetus to voice them. My colleagues at Bloomberg Intelligence reckon the chances of a hard or disorderly Brexit have risen, both because the time to reach a deal is running out and because the fragile political situation is likely to slow progress. Now is not the time to stay quiet.

One also has to wonder whether the mood of the British public really is reflected by people like Martin, who claims to speak for "the majority." Surveys in recent months have shown a majority of Brits are worried about prices going up, want a second referendum on the terms of Brexit and would prefer a change in direction of Britain's negotiating stance. That doesn't mean the country is now awash with regret, more that a debate might actually be possible.

Most CEOs are careful communicators -- it's probably easier for a former boss like Justin King, who ran grocer Sainsbury's for a decade, to say that shoppers are "in the dark" about the negative effects of Brexit. But that makes lobby groups like the CBI all the more important at a time when finance directors' concerns about Brexit are growing. And the high stakes mean that Martin shouldn't be the only boss making himself heard.

If ever there was a time to keep socks away from mouths, now is it.

To contact the author of this story:
Lionel Laurent in London at llaurent2@bloomberg.net

To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net