Brexit win rattles bourses

Pound hits 30-year low

LONDON: Chief executives from Tokyo to Denver woke up to currency turmoil, plunging share prices and tough decisions after Britain’s vote to leave the EU raised widespread fears over economic growth.

In Britain yesterday, businesses including aerospace, pharmaceuticals and manufacturers predicted long term disruption as the pound plunged to its lowest level since 1985.

British Airways owner IAG warned it would not meet its annual profit target and car manufacturers including Ford, which employs around 14 000 people in the United Kingdom, indicated it could ultimately lead to job cuts.

World stocks headed for one of the biggest slumps on record as investors predicted the impact of the narrow 52 vs 48 percent vote for Britain to leave the EU would damage economic confidence across the globe.

Those who campaigned for Britain to leave had said a weaker pound could help UK exports, but it will also reduce the value of foreign companies’ UK earnings and raise questions about access to the EU market.

More than £ 100 billion (R2.05 trillion) was wiped off the market cap of the UK’s biggest bluechips in early trading alone.

J a g u a r L a n d R o v e r, Britain’s biggest carmaker, estimated its annual profit could shrink by £1bn by 2020 if Britain returns to World Trade Organisation rules for trade with Europe.

Shares in the company’s owner, India’s Tata Motors , fell 8 percent.

Some businesses signalled an intention to push for a settlement between the UK and the EU that would minimise damage to their business, while others took immediate steps.

“This is a lose-lose result for both Britain and Europe,” said Airbus chief executive Thomas Enders. “We will review our UK investment strategy, like everybody else will.”

Some investors warned of a coming British or even global recession as sterling collapsed to hit its lowest since 1985.

Big swings in sterling will be a headache for some international companies, with a fall in the currency hitting profits earned in Britain.

International companies with sizeable sterling exposure include Denver-based Molson Coors, owner of Carling beer, which is heavily reliant on the UK.

But f or multinationals reporting in sterling, there will be a short-term boost to profits, when expressed in pounds.

Aside from market access, streamlining of regulations within the EU has made life simpler.

Pharmaceutical companies, for example, enjoy a one-stop shop in the form of the Londonbased European Medicines Agency, which approves new drugs for all EU countries, while the EU’s open airspace deals have fostered a surge in air travel and common policies on agriculture and food safety have allowed for smoother supply chains.

Companies in those sectors have fretted that Britain outside the bloc would disrupt the regulatory landscape.

AstraZeneca said it was concerned for the competitiveness of the British life sciences industry and would work to ensure patient access to medicines, amid worries that leaving the EU could delay drug approvals.

Access to workers is another important factor for companies. Automotive industry executives, who are heavily reliant on exports, ranked a skilled workforce a close second to accessing EU markets in a survey on reasons to remain in March.

Ahead of the vote, some British- based multinationals such as Diageo, Unilever and Rolls- Royce had expressed their support for “Remain” directly to employeess.

Government figures show 12.6 percent of Britain’s economic output is linked to exports to the EU’s 27 other members, for whom only 3.1 percent of output is linked to exports to Britain. And 80 percent 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 in the event of Brexit. For banks, a huge concern has been the threat that financial institutions based in London could lose their EU “passports”, or the automatic right to sell services across the bloc under single low-cost system. That has made bank shares volatile in the run-up to the referendum.

Brexit could also affect large deals already in process, such as Anheuser- Busch InBev’s $100bn-plus takeover of SABMiller and the $30bn merger of London Stock Exchange Group and Deutsche Boerse, though the latter parties vowed to press on with their marriage. – Reuters

PICTURE: REUTERS Traders prepare before the opening of the German stock exchange in front of the empty DAX board, at the stock exchange in Frankfurt, Germany, yesterday after Britain voted in a referendum to leave the EU.