UK business in limbo in face of years of Brexit uncertainty
LONDON — The impact of Britain’s vote to leave the European Union was swift and painful for Ed Bussey’s small tech firm in London.
The founder and CEO of Quill, an online content company, had been looking to fill a software development job paying 70,000 pounds ($95,000) a year that’s been open for six months. He had a job interview set up with a promising candidate from EU member Italy on Friday — the day after the vote.
“Because of what had happened on Thursday, he was not prepared to up sticks and move to London,” Bussey said with chagrin. “He was saying: ‘Look, I’m not sure I’m not going to get booted out in two years.'”
Businesses in Britain already are seeing the impact of the seismic vote to have the country leave the other 27-nations in the trading bloc and strike out on its own. Companies large and small are feeling the shockwave which left Britain in uncharted waters, unclear of what the future will hold.
Being part of the EU guarantees no tariffs on trade on goods and services and the free movement of workers, without the hassle of visas or work permits. Now that it is leaving, Britain will have to first negotiate its exit, which could take years, and then renegotiate new relations with Europe, which could take even longer.
With so much uncertainty looming for so long and financial markets crashing, a lot of business is suddenly in limbo. Some companies are even looking to pull back.
In the first direct reflection of the uncertainty hitting business confidence, a leading business group said 20 percent of its members plan to move some of their operations outside of the UK to be closer to clients on the mainland.
The Institute of Directors said Monday that a survey of its 1,000 members showed that three out of four believe that Britain’s exit from the EU, known as Brexit, will be bad for business. About a quarter said they would freeze hiring and 5 percent said they would cut jobs.
“Ultimately we think that our members are very resilient, we think that British business is tough and will adapt but certainly at the moment there is a lot of nervousness out there in the business community,” IoD spokesman Edwin Morgan told The Associated Press.
Companies are already issuing profit warnings. Real estate agency Foxtons has said it is no longer confident that business will improve in the second half of the year as it had expected before the vote. The parent company of British Airways, IAG, warned on Friday that profits would take a hit this year, as did budget airline easyJet, saying it anticipates economic and consumer uncertainty this summer.
Multinationals that have chosen the UK as a base for operations across the EU are expected to reconsider some of their operations in Britain. Global banks like JPMorgan, Goldman Sachs and HSBC have said thousands could move to the mainland.
So worrisome is the overall picture that Treasury chief George Osborne offered a statement before markets even opened in hopes of calming the jittery nerves. Success on that score was decidedly mixed.
The pound hit a new 31-year record low, dropping another 3.6 percent to $1.3187. Stock markets also declined across Europe. Bank shares were particularly hard hit, as they are considered a mirror on the larger economy. Shares in Royal Bank of Scotland, once the world’s largest bank and now mostly state-owned, fell some 15 percent. Adding to Friday’s losses, that alone has cost the UK taxpayer some 7.3 billion pounds ($9.6 billion) in two days.
But the turmoil is perhaps tougher for small business owners like Bussey, whose 25-person firm doesn’t have a phalanx of lawyers and a human resources department — never mind facing the expense — to seek out software developers outside of the single market.
“In effect, it is closing the door on fast-growth businesses like mine in terms of hiring the best talent in Europe,” Bussey said.
And he’s not alone. Artisan London perfume maker Sarah McCartney has found Britain’s choice to leave the EU has already bruised her small business, 4160Tuesdays.
“The future doesn’t smell so sweet at the moment,” she said. “I buy raw material from Europe, and I sell to Europe. I just think it is going to become a heck of a lot more complicated, and it has already gotten more expensive.”
Italy was supposed to be Sarah McCartney’s next export market, but the uncertainty of whether she soon will be buried in tariffs, duty and paperwork has left her doubting if she should enter Italy at all. Now, she may not participate in Italian perfume trade fair next week that was meant to be her way in.
The plane ticket alone is expensive — never mind the uncertainty of why she should go in the first place.
“I completely understand people feeling cut off from decision-making and voting ‘leave,'” she said, citing many “leave” voters’ desire to protest against the establishment. “But I don’t think they got at all what will happen day by day for people running little businesses, trying their best to earn a living and pay taxes.”
Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.