If you’re running a US business and looking to expand your operations into the UK, then you’ll be fully aware of the spectre of Brexit that’s currently looming over the our economy. And you’ll no doubt be wondering if Britain has completely taken leave of its senses in deciding to leave the European Union (EU) and turn its back on one of the world’s largest trading networks.
But what, exactly, does Brexit mean for your US company? And what will the short and long-term implications be on your future UK business strategy?
Andy Jepson, Partner at Haines Watts London’s City office, talks us through the key impacts of this Brexit uncertainty, and why ‘business as usual’ is the best approach to take.
Why Brexit was an emotional decision
It’s important to factor in the emotional journey of Brexit when you try to understand the reasoning and drivers behind the UK deciding to leave the European Union (EU)
Emotion tends to get factored out of both business and politics, but as humans we don’t make decisions based on just logic and rational thinking. Things get emotive, which is part of reason we ended up in this situation in the first place.
The decision that most British people made during the referendum was driven more on emotion, and less by logic. It was impossible at the time to bring knowledge or cold hard facts into it, because the vast majority of us didn’t have any facts to work with.
So, 52% of people voted to exit the EU – and whether or not you agree with that, this is the situation that your UK HQ will find itself in.
Are US companies concerned about Brexit?
Your first question is likely to be ‘What is going to happen when Brexit hits?’. And, at this moment, nobody has the crystal ball needed to predict what the long-term implications will be.
Most of my US clients are waiting until after 29 March 2019 – when Brexit will, theoretically, take place. But, as I’ve pointed out to many clients, nothing is actually going to change on 30 March.
Nothing will change overnight and the hugely complex import/export rules and tax regulations won’t suddenly be completely different.
An atmosphere of real uncertainty
No-one has a concrete idea what will happen after 29 March, which has led to the current atmosphere of uncertainty within the business world.
Many US businesses are saying they’ll make decisions on their UK investments and strategy on 30 March, post-Brexit. But the reality is that you can’t do that – nothing will change on 30 March and you’ll actually be none the wiser on the implications of having a UK base that’s now sitting outside the EU and the common market.
Without any clear idea of what a post-Brexit UK will look like, the sensible thing is to continue with a ‘business as usual’ attitude – but to also start asking some key questions and looking into scenario-planning in the areas that could, potentially have an impact.
The key concerns for a US business with a UK office
Being a US company with a UK office or subsidiary is not that different from being a solely UK based company. There aren’t any unique challenges on that front for American businesses and your concerns and worries surrounding Brexit will be the same as those of a UK business.
You’ll be asking questions like:
- Will our people have free movement throughout Europe?
- Should we set up offices in other European territories?
- Will staff want to relocate to France, Germany or Poland etc?
- Will we still be able to export our goods to Europe effectively?
- Will there still be a market that we can easily trade with?
- Will there be higher tariffs on exported goods and imports?
What many US businesses want to know is whether the US and the UK will develop their own trade agreement. The US already has an agreement with Europe on tariffs, so will the US and UK governments set up their own trade deal to incorporate this? At present, nothing concrete has been agreed.
This contributes to an atmosphere of uncertainty. And many US companies are waiting until after that March deadline before they do anything around their UK strategy.
Understanding the UK mindset
I recently gave a presentation in a fairly remote part of the US, to eight different businesses, and their key question regarding Brexit was ‘Why are you doing it? The UK must be mad, no?’.
As they pointed out, we don’t know what’s going to happen and yet we’re still negotiating to make this exit from the EU happen – without really knowing why. So many US business people are asking why we don’t just postpone Brexit for 6 months and give ourselves time to really think about it and plan for it properly.
In a nutshell, why are we so focused on this 29 March date?
If you were buying a house, and the structural survey showed there was something wrong with the foundations, you wouldn’t still push ahead with buying it just because you had a date for exchanging contracts on the property. You’d look at the facts and you’d reassess the decision – I completely understand the view that we should be doing that as a country now.
Helping you plan for business as usual
With the future position of the UK in Europe still unknown, and your UK investments and strategy likely to be affected, working with an experienced UK advisor has real value.
The key thing we’ll tell you is that the uncertainty is not going to go away – that’s the inconvenient truth. No-one from our firm or from any of the big financial institutions can tell you anything definite about what will happen post-Brexit. This is an event that’s never happened before, and the potential outcomes are extremely complex.
But what I can say to you, if you’re running a US company with UK interests, is that nothing tangible is going to change on 30 March. The world will not end, nothing to do with your UK business will change overnight and you’re not suddenly going to see any significant negative impact in the short term.
Whatever happens on March 29, if we leave the EU with a deal, for the next 21 months, there is the transition phase where nothing will change while the UK and EU gets its respective houses in order. That will be a whole new story in itself but rest assured it’s 21 months to sort out the devil in the detail.
There aren’t going to be massive food shortages. There isn’t going to be rationing. Life will go on. And we can help you to plan out the eventualities when we know more.
Planning for a post-Brexit UK market
The situation at present is uncertain and if you’re a US business with a UK interest then it’s very unclear what your next move should be – but don’t worry.
In part two of this Brexit blog series, we’ll look more closely at the specific implications for your UK operations, and will show you the main areas where planning will be needed.
Talk to one of our London Business Advisors about planning your post-Brexit strategy.
Want to know more? Call us on 0207 025 4650 or email email@example.com