The Atlanta Journal-Constitution
Brexit uncertainty is maddening for business
How, when, even if creates anxiety that rattles economy.
Britain is set to leave the European Union in less than three weeks — and it’s still not yet clear how it will exit, or whether its departure will be delayed, or if it will leave at all. From the board rooms to the factory floors, there is consensus: This is no way to treat the world’s fifth-largest economy.
The nail-biting final days have triggered anxiety and division across Britain. But the complete incertitude is especially mind-boggling for British businesses.
Companies have been forced to spend hundreds of millions of dollars on contingency planning. Others have had to cut jobs or delay expansions or idle production. Some are already giving up on Britain and moving their operations elsewhere.
“Brexit uncertainty has already done enormous damage to output, investment and jobs,” said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, a trade group representing more than 800 automotive companies.
Britain’s auto-manufacturing industry is in a swoon, with weekly announcements of job cuts at Jaguar, Honda and Vauxhall. The distress is related to an economic slowdown in China and Europe’s move away from diesel. But the absence of clarity on Brexit is also playing a role. “Brexit is the clear and present danger,” Hawes said.
Ahead of the 2016 referendum, many businesses campaigned to remain in the EU, the world’s largest and richest trading bloc. Others said they wanted to leave, complaining that Brussels bureaucrats — aided and abetted by France and Germany — undermined their competitiveness and Britain’s ability to strike trade deals with countries such as the United States.
In some ways, so far, Brexit has been better for the British economy and British business than economists had anticipated. The pound has slid but hasn’t crashed. The gross domestic product managed a 1.4 percent rise in 2018 — the weakest since the financial meltdown of 2008, but not the recession some had forecast.
But no one wanted this: days from the Brexit deadline, without a clue about how or when or if.
The British Parliament has once overwhelmingly rejected the withdrawal agreement negotiated over two years between the EU and Prime Minister Theresa May. Her party whip isn’t confident they have the votes to pass the tweaked deal when Parliament takes it up again today.
Unless Britain requests and the EU approves an extension, the default legal position is that the nation will “crash out” of Europe’s enormous single market and regulatory regime on March 29. Free and frictionless trade could come to a halt. Britain could find itself suddenly branded a “third country” under EU trade rules, subject to quotas, tariffs and border-control inspections.
Might the prime minister’s deal squeak through Parliament this week? Might Britain push to delay Brexit? Might the stalemate continue until there’s no choice but to call for a second referendum?
May warned Parliament on Friday that rejecting her deal again could mean “more months and years arguing. If we go down that road, we might never leave the EU at all.”
For modern businesses, operating in the lean, justin-time delivery ecosystem, this is a problem.
“I don’t know anything, and I don’t know anything because they have left absolutely everything until the last moment,” said Charlie Allen, managing director of Shiner, a Bristol-based skateboard distributor that promises “guaranteed stock” and “timely replenishment.”
Some high-profile companies decided soon after the 2016 referendum to begin shifting their European headquarters out of London. They hoped to avoid potential tax issues (something electronics company Panasonic cited), or they feared data flow disruptions (of obvious concern to tech companies), or they wanted to secure EU market access (a particular worry in the financial sector).
Although London is expected to maintain its claim as the financial capital of Europe, the accounting firm EY estimated in January that financial services companies had moved $1 trillion in assets to other European cities.
“Dublin is our headquarters for our European bank now — full stop,” Anne M. Finucane, Bank of America’s vice chairman, told the Financial Times’s European Financial Forum last month. “There isn’t a return. That bridge has been pulled up. ... From a trading perspective, likewise, Paris would be the European trading arm.”
If Parliament rejects May’s withdrawal deal today, lawmakers are to vote Wednesday on whether to embrace leaving the EU without a deal.