Brexit & Business 1 Year On
While more dramatic (and tragic) events may have pushed Brexit off the front pages (at least some of the time), it certainly still finds a regular place in the business sections. Given that it’s roughly one year since the referendum, it seems appropriate to look at how Brexit is affecting businesses.
The drop in the value of the pound
It’s hard to see this as anything else than a direct result of the referendum result, or perhaps it would be more accurate to say an indirect result in the sense that it reflects the economic uncertainty caused by the referendum result. While the drop in the value of the pound is likely to affect most businesses in one way or another, it’s unlikely to affect them all equally or in the same way. In simple terms, companies which need to buy goods from overseas and outbound tourism will be exposed to higher prices, whereas companies which sell goods overseas or which are focused on inbound tourism, could see their goods and services becoming more attractively priced to their customer base. In some cases, this can get complicated, since global businesses may have a foot in both camps, so to speak. One example of this was the spat between Tesco and Unilever, when the latter tried to increase its prices it the light of the Brexit vote. While Unilever does make some products, such as Marmite, in the UK, using ingredients sourced here, the reality is that it is a global company and hence needs to look at the bigger picture in terms of finance and the relationship between currencies.
The uncertainty of the rights (or otherwise) of EU nationals
Again, this may affect all businesses to some degree but is likely to affect some industries much more than others. The construction industry for example has long attracted trades people from other EU countries and agriculture has made extensive use of seasonal labourers from across the EU for the harvesting season. In principle, for the time being, it is business as usual for EU citizens in the UK, but it’s a very open question how many of them will choose to stay here or to come here in the first place if they feel they are unwelcome and/or unsafe and/or likely to be forced to leave regardless of whether or not they want to. Some at least, may see it as a safer option to organise their own departure before they are pushed out. On a similar note, industries such as inbound tourism may find it harder to attract customers from the EU, although the weakness of the pound may help to entice them.
The overall outlook
Certain industry sectors have been vociferous in their views on Brexit. The financial services sector, for example, is concerned about the losing access to the “passporting” system, which allows it to operate throughout the EU. Access to the single market, or the lack thereof, is clearly a major issue for business in general, but again, it will probably affect different businesses in different ways and to different degrees. For example, businesses which have only exported via single-market channels probably have the most reason to be nervous about how they will manage if they lose access to it. Businesses which only operate domestically are unlikely to feel any direct impact from the UK exiting it (although they may be indirectly impacted if it causes issues for their customer base) and businesses which already export globally will presumably be used to operating outside the framework of the single market and therefore less likely to be spooked by the prospect of exiting it, even if they would ideally prefer to remain inside it.