Brexit – doom for businesses in Britain?
On June 23, 2016, Britain sent shockwaves around the world, when more than 52 per cent of 30 million of its people voted to leave the European Union. Since then, the term Brexit has been used to describe Britain’s decision to leave the EU. However, till today, many are unclear why Britain voted to leave the EU in the first place. The EU is an economic and political partnership involving 28 European countries which was implemented after the Second World War. It has since grown to be a single market which allows for the free movement of people and goods and has its own parliament and currency used by 19 countries. During the referendum, those who voted in favour of leaving the EU argued that Britain was being restrained by the EU by too many rules, mainly pertaining to business.
However, the question of when Britain will actually leave the EU remains to be seen. Since the referendum, Theresa May, the former Home Secretary took over as the new Prime Minister. She, like her predecessor, David Cameron, were against Britain leaving the EU. The Brexit vote merely signalled Britain’s wish to leave the EU but did not actually set the process in motion which would only begin when Article 50 of The Treaty of Lisbon is triggered. After triggering Article 50 it is supposed to take two years to completely leave the EU but many experts think it could take far longer. Recent reports revealed that this could be delayed due to certain unforseen circumstances.
Impact On Businesses
Britain’s vote to leave the EU had reportedly left a large number of CEOs looking at the possibility of relocating their operations to outside Britain. Surveys revealed that more than 70 per cent of the CEOs interviewed preferred Britain to remain a member of the EU. They claimed that the exit would disrupt Britain’s ability to do business and many were looking at different scenarios to hedge against any unforseen circumstances. There were also reports that the vote would endanger close to a million jobs.
British newspapers reported that among the companies which raised the possibility of relocation was Vodafone Group Plc. and low-cost airline, EasyJet Plc. Both said if negotiations following Brexit were unfavourable, they could not guarantee they would remain in Britain. In fact, EasyJet said it was seeking an operating certificate in another EU country to ensure unfettered access to the bloc after Brexit. Even Lloyd’s of London Ltd said they may move some of their operations outside Britain.
The latest to join the chorus of those planning to relocate were bankers, who warned that they may have to relocate thousands of jobs due to Brexit. In fact, Theresa May had earlier said that being part of the single market was significant for Britain and that businesses could leave Britain after Brexit. She said people invested in Britain because it was part of the EU and because of this, there were definite economic benefits. “I thnk being part of a 500 million trading bloc is significant for us,” she had said.
Though most businesses which were looking at relocation had not clearly stated which country they had in mind, but Germany, France, Ireland, Malta and Luxemberg have been mentioned. A major Lincolnshire employer, Smiffys recently announced it is moving its headquarters to Netherlands as a direct result of the Brexit vote. Elliott Peckett, director of Smiffys, said 40 per cent of the company sales go to the EU, its largest trading partner.
However, according to analysts, it was unlikely that Brexit would destabilise Britain as a preferred choice for companies to invest. They argue that Britain’s competitive edge was not solely based on single market access, but also strongly supported by a solid legal system, skilled workforce and a large amount of support services. Due to this, analysts believe most organisations would opt to keep part of their operations within Britain.