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Brexit Will Challenge Corporations but could be for the Better
Increased market volatility. Shifts in supply and demand. Excessive import/export constraints. Immigration restrictions. A devalued pound. My last blog post about the recent
mergers and acquisitions boom had a larger theme focused on increasing economic uncertainty. The recent Brexit decision compounds this uncertainty; creating a whole new set of challenges for global corporations trying to do business in Great Britain and the EU. The panic has somewhat subsided since the initial announcement and having just returned from a trip to the UK, I came away with a more positive and (cautiously) optimistic view.
No doubt, several industries will take a hit as a result of Brexit but I suspect British multinational companies could end up better off after the adoption of new and potentially better trade deals. After all, “… the EU is currently Britain’s biggest trade partner, accounting for over 50% of the UK’s exports. If we also include countries that the UK trades with through their open agreements with the EU, then this rises to 63%...” (According to a CAPITA online article). Because of this, Brexit could give Great Britain the flexibility it needs to position for the future. A future that reflects the Great Britain the people voted for; an independent country with stronger trade deals and more conservative immigration policies.
The European Union has reason to be concerned. Losing any member country has an obvious negative impact but Britain is the second-largest net contributor to the EU budget and this raises a number of questions about the future of the Union. Questions like, “How will Britain’s exit impact union members financially; especially Germany and given the weaker economies of some member countries?”; “Will we see a chain reaction of other members opting to abandon the EU?”; “Will countries previously looking to join the EU now hold back?” While a complete unraveling is unlikely, how effectively these questions are addressed will be critical to seeing a stronger, more unified EU post-Brexit.
US and other global corporations are still evaluating the risks and costs associated with operating in the region following Brexit. While more recent assessments suggest the impact could be far less severe than originally anticipated, several questions remain. Perhaps the most critical among them; “Will US and other global corporations continue and/or expand operations in Britain or the EU?”
Only time will tell how Brexit will play out in Britain, the EU and abroad but amid all of the speculation and looming questions, the only certainty is that there’s no stopping this change… but organizations are not powerless. NKF is already helping clients to do more than just prepare for the risks associated with today’s uncertain business climate; they’re helping them thrive in it.