Brexit and Business: The EU Outlook
In the UK, the Brexit debate has focused almost exclusively on the interests of UK plc and British consumers, ignoring an important perspective: the EU business community.
As such, at Baker McKenzie, we sought out the EU view, speaking with 800 business leaders across France, Spain, Germany, Ireland, Sweden and the Netherlands. We asked about the impact of Brexit to date, business preparedness for the future and sentiment towards the UK.
We found some striking results. In particular, while the UK has yet to leave the European Union, European businesses are already seeing significant repercussions from the referendum, with almost half the respondents saying that their company has reduced investment, trade and operations in the UK. The same proportion report disruption to their supply chains and decreased movement of people in their organisation.
EU business leaders acknowledged their reliance on the UK market, with 95% saying it is of at least some importance to their business, and 78% reporting that they would be the same or better off if the UK were to remain in the EU.
Nevertheless, emotions run high on both sides of the channel when it comes to UK's decision to leave the EU. A third of EU respondents would like to see the UK punished under the terms of any future trade deal, with particular hostility in France and Germany, the EU centres of power, where that proportion jumped to 45%. That said, at the end of the day, pragmatism wins out amongst the business community with the vast majority (96%) agreeing that continuing to trade with the UK on good terms is more important than retaliation.
Nevertheless, our European neighbours share the frustrations of many British observers when it comes to the negotiations themselves. Only 46% of respondents felt that their business or industry has been substantively consulted by the EU or by their national government with regards to Brexit. Individuals in Ireland were particularly negative; fewer than one third of those surveyed said their industry had been consulted.
It's imperative that companies continue to engage with their governments, including through industry bodies and other stakeholders, while they can still influence the outcome of the negotiations. Support for a Free Trade Agreement is high amongst the European business community: 67% of respondents rated having an FTA as important, compared to just 45% who said the same thing about a Customs Union, though there are possible misconceptions as to the advantages and disadvantages of either solution.
Regardless of sentiment, the business community is now having to prepare for the future. The vast majority of companies are actively assessing Brexit-related risks: 88% of respondents across all markets are reviewing their position in the light of the referendum. Even more significantly, 78% of them have made changes to their operations or strategy as a result of their findings - putting paid to the notion that companies in EU27 markets are treading water whilst they await the outcome of the Brexit negotiations.
With Brexit now just months away, businesses should urgently be considering the impact on the movement of goods, services and people, as well as preparing appropriate risk-mitigation techniques, in the event that politicians fail to reach an effective arrangement.
Jennifer Revis, partner at Baker McKenzie