From Beer to Drugs to Cars: Global Business Laments EU Vote

Big businesses have been strongly in favour of remaining in the world’s biggest trading bloc.

Shocked chief executives from Mumbai to Denver woke up on Friday to face tough decisions over how to respond to Britain’s vote to leave the European Union.

In Britain itself, businesses as diverse as engineering group Rolls-Royce, pharmaceuticals giant AstraZeneca, house-builders, and makers of Scotch whisky were braced for disruption in the short and long term as the pound plunged to its lowest level since 1985.

Big businesses – with a very few exceptions – have been strongly in favour of remaining in the world’s biggest trading bloc, primarily because of ease of access to 500 million European consumers.

“The weeks and months ahead are going to be a nervy time for business leaders,” Simon Walker, Director General of British business lobby the Institute of Directors, said on Friday.

Jaguar Land Rover, Britain’s biggest carmaker, has estimated its annual profit could shrink by £1 billion by 2020 if Britain returns to World Trade Organization rules for trade with Europe.

Shares in the company’s owner, India’s Tata Motors , slumped more than 10 percent.

Makers of Scotch whisky, who export about 90 percent of what they produce, have stressed the importance of the EU, which swallows about a third of those exports, but also the clout EU membership gives in negotiations with fast-growing markets such as India, which has a 150 percent tariff on imported spirits.

Some investors warned of a coming British or even global recession as sterling collapsed to hit its lowest since 1985, while FTSE futures fell 8 percent.

The President of Japan’s Nippon Steel & Sumitomo Metal, the world’s second-largest steelmaker, said the vote was extremely disappointing.

We are greatly concerned for the negative impact this will have, not only on Britain and the EU but also on the global economy.

Kosei Shindo

Martin Sorrell, the boss of the world’s biggest advertising group WPP, said “this decision will create tremendous uncertainty, which will slow economic activity and decision making.”

Sterling Headache

Big swings in sterling will be a headache for some international companies, with a fall in the currency hitting profits earned in Britain.

Aside from market access, streamlining of regulations within the EU has made life simpler.

Pharmaceutical companies, for example, enjoy a one-stop shop in the form of the European Medicines Agency – based in London – which approve new drugs for all EU countries, while the EU’s open airspace deals have fostered a surge in air travel and common policies on agriculture and food safety have allowed for smoother supply chains and richer eating.  

Companies in those sectors have fretted that Britain outside the bloc would disrupt the regulatory landscape.

“This creates immediate challenges for future investment, research and jobs in our industry in the UK,” said Mike Thompson, CEO of the Association of the British Pharmaceutical Industry.

AstraZeneca said it was concerned for the competitiveness of the British life sciences industry and would work to ensure patient access to medicines, amid worries that leaving the EU could delay drug approvals.

Access to workers is another important factor for companies. Automotive industry executives, who are heavily reliant on exports, ranked tapping a skilled workforce a close second to accessing EU markets in a survey on reasons to remain in March.

Ahead of the vote, some British-based multinationals such as Diageo, Unilever and Rolls-Royce had expressed their support for “Remain” directly to employees, although most stopped short of this.

The Confederation of British Industry has estimated there could be between 550,000 and 950,000 fewer jobs by 2020 as a result of Brexit.  

For banks, a huge concern has been the threat that financial institutions based in London could lose their EU “passports”, or the automatic right to sell services across the bloc under single low-cost system. That has made bank shares particularly volatile in the run-up to the referendum.

Brexit uncertainty has also helped push British merger and acquisition activity this year to its lowest as a proportion of global activity since records began in 1980.