The result of the BREXIT referendum has sent a wave of shock across Europe and the entire world. “It was unbelievable, but true”. The Brits voted to leave the EU and the new Prime Minister, Theresa May, has committed to respect their decision. “BREXIT is BREXIT” she said, immediately after taking office. Recently, she announced that the UK would trigger Article 50 of the Lisbon Treaty by the end of March 2017. This would be the beginning of the two year negotiation process for leaving the EU bloc. It would be the first time in history when a country “divorces” the EU. Therefore, Europe and the whole world has a lot of uncertainty on the horizon. The impact of this shift is impossible to be foreseen at the moment. The EU and the UK may never be the same. Yet, focusing on the (consistent) negative effects of BREXIT, the other European countries could overlook the opportunities it creates.
The series “BREXIT means Business” has taken on the mission of revealing some ways in which states/we could benefit from during this turbulent period.
Positive Important in October:
- -> The British government made an undisclosed deal with Nissan, which gave many other companies the hope they will get the same treatment. The Japanese car maker threatened to leave the United Kingdom, fearing BREXIT would have a decisive impact on its businesses. Nissan exports 55% of its cars to Europe and was concerned that it would be hit by the new trade tariffs the EU is going to impose on goods coming from the UK, as the country is preparing to leave the Union. But the government promised extra support in a written assurance and the company committed not only to stay, but also expand. It will build two new car models in its plant in Sunderland.The deal prompted immediate reactions from other car makers – like Jaguar Land Rover and Ford – and from bankers. They all said they need avoid tariffs and want similar deals with Theresa May’s cabinet.
- -> The UK risks losing highly skilled migrant workforce, which is a major asset for companies. A survey conducted by the Financial Times revealed that two out of five EU citizens living and working in the UK have concerns over job security with BREXIT on the horizon. The FT polled people coming from Italy, Germany, France and Spain. Most of them – 27% – work in finance. But particular concerns are felt by those working in constructions, manufacturing, retail and hospitality. Nearly a quarter of those questioned said they no longer felt welcome in the UK. One fifth have plans to leave within the next two years and almost 40% think about leaving, but made no plans yet. This is also a reaction to the rise of anti-immigration sentiment, felt after the BREXIT referendum. This big proportion of skilled workers who want to leave are most likely searching for jobs elsewhere in Europe.
- -> Bankers BREXIT is on the horizon. The BREXIT perspective makes the financial sector particularly nervous, as leaving the single market would leave banks without their so-called passport rights, which allow them to offer services in all the EU countries, while having bases in London. Many important players in this sector, like UBS and Morgan Stanley warned they would move jobs away for the UK. Britain is at risk of losing between 70.000 and 100.000 jobs in the financial sector, which would be relocated somewhere else in Europe. The British Bankers Association warned that financial firms may start leaving London within weeks, putting pressure on the government to react and give them assurance that BREXIT would have a limited impact on them. Meanwhile, in continental Europe, France and Germany are already luring banks to come. London Bankers received the message that “Frankfurt wants you” the next day after the referendum. And France is helping banks and financial firms to consider moving to Paris, said the French president and minister of finance.
- -> British firms weight on the possibility of moving away from the UK. Smiffys, a company with more than 120 years of trading in the UK, announced it would move headquarters to the Netherlands. The firm expressed concerns regarding trade tariffs with the EU (where it sells most of its products) and the workforce (as it employs european stuff). Many other companies are tempted by this idea. Yet some are discouraged by the red tape involved in moving their base elsewhere. Therefore, in order to attract them, governments should reduce bureaucratic burdens.
- -> For investors, BREXIT would be a great opportunity to buy cheap British equities or bonds or even property in the UK. Sure, the country leaving the EU bloc would produce uncertainty and turbulence. But most analysts say it would only be for the short term. EU and UK would eventually be fine separated. Therefore the prices are expected to rise again.