CEOs brace for months of disruption as pound tanks
| Companies see a negative impact from vote not only on EU and Britain but the global economy
SHOCKED chief executives from Mumbai to Denver woke up on Friday to face tough decisions over how to respond to Britain’s vote to leave the EU.
In Britain itself, businesses as diverse as engineering group RollsRoyce, drugs giant AstraZeneca, housebuilders and makers of Scotch whisky were braced for disruption in the short and long term as the pound plunged to its lowest level since 1985.
Big business — with few exceptions — has been strongly in favour of remaining in the world’s biggest trading bloc, primarily over ease of access to 500 million European consumers.
“The weeks and months ahead are going to be a nervy time for business leaders,” Simon Walker, directorgeneral of British business lobby the Institute of Directors, said on Friday.
Jaguar Land Rover, Britain’s biggest carmaker, has estimated its annual profit could shrink by £1-billion (about R20.6-billion) by 2020 if Britain returns to World Trade Organisation rules for European trade.
Shares in the company’s owner, India’s Tata Motors, slumped more than 10%. Makers of Scotch whisky, which export about 90% of their produce, have stressed the importance of the EU, which swallows a third of those exports, but also the clout EU membership gives in talks with fastgrowing markets such as India.
Some investors warned of a British or even global recession as sterling collapsed and FTSE futures fell 8%.
Kosei Shindo, president of Japan’s Nippon Steel & Sumitomo Metal, the world’s second-largest steelmaker, said: “We are greatly concerned for the negative impact this will have, not only on Britain and the EU but also on the global economy.”
Martin Sorrell, boss of the world’s biggest advertising group, WPP, said: “This . . . will create tremendous uncertainty, which will slow economic activity and decision-making.”
Big swings in sterling will be a headache for some international companies, with a fall in the currency hitting profits earned in Britain.
Aside from market access, streamlining of regulations within the EU has made life simpler.
Pharmaceutical companies, for example, enjoy a one-stop shop with regulator the European Medicines Agency, while the EU’s open airspace deals have fostered a surge in air travel and common policies on agriculture and food safety have allowed smoother supply chains.
Companies in those sectors fret that Britain outside the bloc would disrupt the regulatory landscape.
“This creates immediate challenges for future investment, research and jobs in our industry in the UK,” said Mike Thompson, CEO of the Association of the British Pharmaceutical Industry.
Access to workers is another important factor for companies.
Automotive industry bosses, who are heavily reliant on exports, ranked tapping a skilled workforce a close second to accessing EU markets in a March survey on reasons to remain.
Government figures show 12.6% of Britain’s economic output is linked to exports to the EU’s 27 other members, for which only 3.1% of output is linked to exports to Britain.
And 80% of British businesses trading overseas do so with the EU.
The Confederation of British Industry has estimated there could be between 550 000 and 950 000 fewer jobs by 2020 because of Brexit.
For London banks, a huge concern has been losing their EU “passports”, or the automatic right to sell services across the bloc.
Brexit uncertainty has also helped push British merger and acquisition activity this year at its lowest since records began in 1980. —
This will create tremendous uncertainty and slow down economic activity