Some Mid-Market Companies are Decreasing Investments in Great Britain Following Brexit Vote

U.S. mid-market companies may already be reducing their investments in the UK in anticipation of red tape and rising costs when the country exits the European Union.

gettyimages-535459060-compressorThe National Center for the Middle Market (NCMM) surveyed 569 mid-market firms and found a nearly 50/50 split of businesses saying they did or didn’t anticipate an impact on their operations. NCMM Executive Director Thomas Stewart said while the data doesn’t appear to be “earth-shaking” for the middle market as a whole, it is important to note that 13% of these firms are predicting an “extremely significant” impact on their businesses. A quarter of U.S. mid-market companies said they would decrease business investments in Great Britain, while a quarter also said they would reduce their purchases from and sales to the UK.

While final details of how Brexit will take place will still be worked out over the next couple of years, it is expected that the UK will require its own shipping procedures and no longer have cross-border efficiencies. Middle-market executives have expressed concerns about the red tape and fear it could become an even bigger problem should other European nations move to leave the EU.

“The uncertain complexities Brexit introduces to international regulation are clearly troubling American exporters and importers,” said Stewart.

“The uncertain complexities Brexit introduces to international regulation are clearly troubling American exporters and importers.”

The Wall Street Journal noted that there are already signs that companies are slashing investments after Brexit. Money being held in money market funds was up almost 20% in September since the start of the year, according to Crane Data, LLC, and most of the increase happened after the Brexit vote. Around two thirds of investments in sterling money market funds are corporations it could mean that, as economists hard warned, many are postponing capital investments due to Brexit uncertainty. “You could well see those balances increase further from here,” said Andrew Dickinson, head of money market and short duration funds at Aberdeen Asset Management.

Since the vote happened, economists have argued that it would lead business investment in Britain to fall, and hamper economic growth in the second half of the year. British Chamber of Commerce estimates are that investments will fall by 2.2% in 2016 and 3.4% in 2017.

Meanwhile, Chief Executive reported in July that the impact of Brexit on U.S. companies could depend on the sector they are in. It is expected to take up to two years for the EU to draft a formal exit plan for the withdrawal of Great Britain. Many U.S. companies, such as Penske Automotive Group, Molson Coors and PPL Corp., have downplayed the impacts they feel Brexit would have. But others, especially companies in the financial industry or those that have big markets in Europe or operate subsidiaries in Great Britain, could have less incentive to operate there in the future.

Yet the NCMM says there still could be a silver lining for the U.S. economy. Twenty-eight percent of firms surveyed predicted decreases in UK business investments with an almost equal number predicting increases in U.S. business investments. Stewart says it indicates that some U.S. companies are investing money here at home that they otherwise would have invested in the UK. “If so, middle-market company responses to Brexit will hurt the United Kingdom and help the United States,” said Stewart.


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.