Great Britain

If U.K. Voters Make a Brexit They Will Take Unwilling U.S. Businesses With Them

If U.K. Voters Make a Brexit They Will Take Unwilling U.S. Businesses With Them
Image credit: Niklas Halle'n/Stringer | Getty Images

On June 23, British voters will decide if the United Kingdom stays or leaves the European Union (EU). For more than 40 years, the British and European economies have been tied through trade, taxes, policies and mobility. Now, however, there are some that feel that the strict membership rules and growing number of EU policies (which in some cases trump domestic agendas), make it difficult for some nations to act independently and retain their national sovereignty.

Uncertainty and fear are high approaching the vote, and currencies and global markets are feeling the impact. The pound has fallen significantly ahead of the vote. Additionally, the Brexit is causing a ripple effect throughout the region. The Czech Republic is considering its own referendum and Scotland is thinking of once more bidding for its independence from Great Britain. With so much foreign trade and investment depending on the U.K.’s involvement in the European Union, it is important to examine how the decision will impact U.S. businesses once the June 23 vote is behind us.

What’s at stake?

The U.S. and U.K. have a relationship that goes back centuries. For American businesses, the U.K. is more than another business destination. It’s America’s biggest trading partner in the EU, doing more than $200 billion of bilateral trade annually, serving as the gateway to Europe’s single market with more than 500 million potential customers. Severing the U.K.-EU ties would carry significant risk to the bottom line of corporate America. A Brexit would mean that the U.K. would no longer serve as an access point to the single market. It could also impact the 20 percent of all U.S. exports that go to the EU every year, the goods and services trade flows of about $2.7 billion a day and the transatlantic investment responsible for roughly 6.8 million jobs.  

What does this mean for your business?

A Brexit will require U.S. businesses to find themselves looking for alternate entry points to Europe to once again gain access to the single market.

A Brexit also means evaluating your business, having a clear view on long term growth strategies and understanding how new market conditions could impact your business. For instance, will the change in access to the European Union impact relationships or alter plans for international expansion? Businesses will also have to prepare themselves for possible impacts on their bottom lines. Currently the U.K. and U.S. partnership equates to about 1 trillion dollars in investments and about a million employees going to work each day for each country. Any changes that result from Brexit will impact your bottom line.

Furthermore, businesses will need to consider the cost to comply with the regulations and policies of a new country. On the plus side, U.S. businesses importing goods and intellectual property from the U.K. are likely to find that the strength of the dollar bring their costs down.

How to prepare

Yes there is uncertainty, but there are steps you can take today to shelter your business and prepare for the expected. By thinking of the following, no matter what happens with the June 23 Brexit vote, your business is prepared.

  1. Think big picture: Brexit is just one example of global changes and policies that can impact your enterprise. Use this uncertainty to think about your entire business by asking yourself a few questions. Do you have international suppliers or vendors? Are there planned expansions that will require new office space? Are you planning to hire new talent or in making large investments? By thinking about all business operations, business owners can identify the parts of their business that need additional support and attention.  

  2. Take control: Once entire business operations have been analyzed, owners can leverage current market conditions and protect themselves against any further depreciations that might occur because of the Brexit. For example, connecting with international vendors and suppliers and locking in long-term prices can help reduce costs. Setting up recurring payments can also be advantageous, especially if payment amounts are agreed upon in advance -- this means no unexpected fluctuations in price.  

  3. Consider the unexpected: Beyond what you can control and plan for, don’t overlook the Federal Reserve in your plans. The Federal Reserve for months has played around with the notion of whether or not it will raise interest rates. Over the course of the summer it will hold several  FOMC (Federal Open Market Committee) meetings, and interest rates are always a topic of conversation. Given the market’s volatility and the uncertainty driven by Brexit, oil prices and other global factors, a hike could well be on the cards.

At the end of the day only time will reveal the true outcome of the June 23 Brexit vote. That said by strategically examining business operations and planning, business owners can mitigate risk and set in motion actions that will move the business forward.