Leaving the EU is a mistake for Great Britain yet
could become a mistake for European business if not handled with utmost care
In the UK, Brexit was essentially
a manipulative political campaign by fringe parties and an arrogant laissez
faire approach by the establishment, which has left Europe with Europeans questioning
the EU’s real worth? Combine this with poor planning for refugees/immigration
at an EU level along with an unconsidered reaction to the new reality of a
Middle East in crisis, the plight of the lucky European becomes a very real
issue for so many. The material focus of the pubic is often a result of
national politics trying to redirect attention to these issues at the cost of other
more local issues.
In the UK, there was a
stagnant and disenfranchised north (England) ignored and made suffer in some
areas whilst others in the south (England) accessed services, opportunities and
wealth with much greater ease. Where there is inequity and narrowing of wealth
distribution, social tension always rises. Add a dolip of dirty politics in
this case from the UKIP, terrorism from a handful of delusional ISIS terrorists
and manipulation at a national level et voila!!... the UK south falls asleep
and the north succumbs to cruel manipulation by far right whack jobs looking to
take us all back to the 17th century, where they of course are
fiefdom Kings and Queens.
It’s my opinion that
great British resolve was replaced by bitterness and anger in the north at the
south’s apparent affluence, whilst they suffered economic recession. Business
encapsulated in the south’s bubble of affluence never imagined a Brexit
win. Arrogance took over whilst the fringe elements of UKIP struck chords with
the disenfranchised members of British society yet was still discounted as
brinksmanship that could not sway any right thinking voter. The rest is a
matter of history, which brings markets and economies all over Europe to a
state of anxiety as EU member states head once again into unchartered
territory.
The majority of (multinational)
Corporate America and AsiaPac corporates are being build upon a cost effective
centralisation model in a preferably English speaking country that is talent
rich, tax friendly and pro business. This trio of likes has seen UK gain a huge
share of centralised Multinational trade, which combined with the enormous
Financial Services hub in London accounts for a substantial chunk of the UK’s
economic machine. With Brexit, the trade side of their international business
seems to now be in peril regarding Europe so why stay in Britain at all? Are
they locked in? What will it cost to stay and what to leave?
They are all good
questions which cannot be answered until UK triggers article 50 of the EU
treaty to leave the EU. The detailed guidelines make it non legal for Britain
to make trade deals with anyone until they have left the EU and are legally
recognised as a “third country”. In this context, the UK is at a manifest
disadvantage as are every multinational goods company that has international
operations in the UK. So, as a way forward, the best thing to do is to risk
assess in a logical manner the situation bearing the following in mind.
Bilateral Negotiations - Britain is looking for latitude to make
bilateral negotiations in principle whilst they exit the EU. If Europe
cooperates, the profile of UK trade access internationally will be
significantly enhanced from the disastrous isolation it is effectively asking
for under article 50 of the EU treaty. Bear in mind some of the bellied rascals
like Boris Johnson who weighed in behind UKIP lies and innuendo on Brexit are
now in key positions. It’s a point not lost on Brussels.
Tariffs - Britain will no longer be a member of the EU, so the
risks of transborder trade, including tariffs, capital FX controls and taxes
such as retention tax will be elevated as a risk consideration.
Skilled R&D - Access to European countries for trade
and assets such as R&D and labour are not clear thus should be considered
as an elevated risk element to be quantified when the level of concessions
Europe gives the UK on exit are known.
Costs - Cost of doing business Internationally in UK will
rise despite the tax concessions promised by the UK Treasury department.
Labour - Labour movements will become more restrictive for
Britains and Europeans. How restrictive this is depends on the deal to be struck
with the EU. This is another part of the risk assessment that should be
carefully considered.
FX /Markets – They should be closely monitored for
capital flights, trading shocks and of course any new regulatory rules on
capital and FX controls that affect international trade vehicles like FX,
company stock trading and access to debt finance.
The misadventure in the
UK has shown the potential downside even in favoured approaches in
international business. That said, for every problem, there is a solution and
he who does not panic gets a head start on he who does. Maybe clear vision will
change the landscape when deals are finally made making haste the highest of
risk elements to be avoided at all costs.
Sources/Credits:
Pics;
Chris Lawton at https://unsplash.com/photos/QPOaQ2Kp80c
Credits:
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