Brexit has created an uncertain environment, but the outlook isn’t all bad.
We look at the projected gains and losses across our top 6 industries and give you a measured approach to managing the impact on your business, for any outcome.
Let’s look at the list of losses and gains, presented in a paper by Woodford Funds, and compare them to the real-life changes you’ll see in your business:
|Less regulation||Possible tariffs on exports to the European Union|
|Savings on European Union contributions||Loss of access to the single market|
|Ability to strike new trade deals||Damage to the City|
|Skills-based migration policy||Drop in investment caused by uncertainty|
Table 1: Sources of possible gains and losses from Brexit
Sources: Capital Economics via https://woodfordfunds.com/economic-impact-brexit-report/
How different business sectors are affected will be determined by both the trade settlement and the government’s policy response, but certain sectors are more at risk.
British carriers, under the EU, are able to fly freely in the European Common Aviation Area. With a move out of the EU, this freedom will be impacted. While we cannot say what the exact changes will be, the airlines will need to make accommodations for filing, activating and closing flight plans in the EU airspace.
In addition to this, the cost of flying with the recently depreciated Pound Sterling has increased, causing many people to change their travel plans in favour of something more affordable. This only applies to UK citizens, though, and travel from other countries may increase due to better exchange rates.
Alternatively, putting plans in place to ensure employees are compliant, regulations are followed and processes are updated is absolutely key to continued success.
The Pound is likely to strengthen, and the travel plans of residents will expand again once the dust has settled.
Insurance, reinsurers, banks, and investment banks within London may no longer have their head offices in one of the world’s financial hubs. The Brexit vote has also put these firms at risk of no longer being able to conduct their business from anywhere within the EU. According to Oxford Economics, the financial sector is the most at risk in the aftermath of Brexit.
Moving into a hub where it is still possible to trade freely in the EU is a good solution to a very real problem. Connor Heaney, MD of CXC Corporate Services, gives his advice:
Being granted banking licence authorisation in one Member State opens the possibility that a credit institution can passport throughout the rest of the European Union without the need to establish a subsidiary in another Member State. Passporting can be affected through either: ·
the establishment of a branch in another Member State (subject to notifying the home member state) or
by the provision of services in another Member State (i.e. services are provided in another Member State but no physical presence is established in that State), also subject to notification requirements.
UK exports will be hard-hit by the changes in trade agreements, since 50% of the UK’s food and drink exports are sent into the EU under the existing trade agreements, and a further 13% are traded with countries that have agreements linked to EU memberships. This means that producers of food and drink products in the UK economy will find themselves having to comply with old rules to keep their business, but new rules to operate within the UK.
Should the trade agreements be favourable, when they’re finally settled, this won’t have as big an impact as has been projected in the worst-case-scenarios, but it will still change the process through which agribusiness trades with the EU.
Subsidies from the EU account for a large portion of UK farmers’ income and the UK government will no doubt need to step in to supplement these with the exit from the European Union.
In addition to this, the restriction of free movement of labour will impact the manufacture and production of processed goods and raw materials.
CXC Suggest investigating setting up an Irish Entity to consolidate your European Revenues and to become your European HQ Function, ensuring access to Market, Freedom of Movement and favourable trade agreements. It may be beneficial to consider Ireland as an export hub for your business.
Homebuilders and construction companies will see an entirely different side of the Brexit coin. With employment prospects unclear, nobody can safely say whether the homebuilders industry will see growth or decline over the coming years.
Construction, in general, is impacted by the new arrangement by the possible loss of leads within the EU, as procurement for EU infrastructure projects may now exclude them.
Labour from outside of the UK will be harder to come by, and as such, securing additional manpower when needed will be much more difficult.
The economic instability, changes in taxation, and hindrances to foreign investment may also impact the earning potential of construction companies in the near future, changing the way they work with labourers, contractors and other suppliers.
While the Business Insider seems to think it’s all doom and gloom, the global construction market is forecast to grow by over 70% by 2025. Orla Byrnes, Global Sales & Marketing Manager for CXC Global, suggests a solution:
If the UK propose and implement favourable trade agreements with countries, it then opens the doors for innovation and technologically advanced construction to advance within the UK.
This is another industry that has been struck by the doomsday preppers. Enders has amended their 2016 forecast in the wake of Brexit, in anticipation of a slowdown that will carry through the rest of this year.
According to the Enders report, “If the UK audiovisual sector is to emerge relatively unscathed, it is vital that it retains its ties with the Single Market by joining the EEA. The alternative is unthinkable.”
The same advice we’ve given for agribusiness applies here: setting up an Irish Entity to consolidate your European Revenues and to become your European HQ Function, ensuring access to the single market, freedom of movement, and favourable trade agreements.
The EU accounts for 56% of the pharma exports from the UK, and the reason that this number is so high is that the regulations around clinical trials, criteria for drug approval, quality standards and intellectual rights are standardised across the EU.
In addition to the common problem of labour shortages, the pharmaceutical industry has a great deal to do to ensure compliance if the UK leaves the EU single market. The broader implications of this are that the UK may run into shortages of their imported medications, and lose out on trade and exports for medications manufactured in the UK.
We already know that the health industry in the UK should – and probably will – lobby to have their regulations aligned – or even directly copied – from the EU’s pharmaceutical guidelines and regulations. This will pave the way for the pharmaceutical industry to continue to send and receive medications across the borders of the EU.
In the event that these changes are not immediately clear, Connor Heaney weighs in on why you should consider a move to Ireland:
As the second largest exporter of MedTech products in Europe, Ireland supplies 95 of the world’s top 100 countries (ranked by GDP). Over 25% of the world’s population that have diabetes rely on injection devices made in Ireland. An impressive 50% of ventilators in acute hospitals worldwide are manufactured in Ireland. While 33% of the global supply of contact lenses are made here.
With the highest number of personnel per capita employed in MedTech in Europe, Ireland has a deep pool of experienced and highly trained technical and managerial talent. Key areas of specific excellence include mechanical, electronic, materials engineering and science specialists.
For more information on Ireland as HQ, or how CXC Corporate Services can help you to facilitate a move to Ireland, contact Connor Heaney at [email protected].
Words and graphics by Alison Krumm