UK-Based Firms Prepare For A Difficult Brexit As Parliament Votes To Start The Process
Brexit is in limbo no longer. UK Parliament has voted in favor of Prime Minister Theresa May beginning the country's removal from the European Union, and UK-based companies are growing increasingly wary of its effects.
The referendum vote happened seven months ago but was put on hold after the High Courts ruled Parliament had to give the OK to start the Brexit process.
UK-based Aviva Investors CEO of global real estate Ed Casal said despite efforts to come up with a contingency plan prior to the vote, the company is spending more money to study the effects of Brexit on operations.
"While we had a contingencies plan, in our hearts [Brexit] was really not going to happen,” Casal said at Bisnow's New York City foreign investment event this week. “As the weeks go on, and this looks like a harder Brexit, we’re looking at if we need to do more, in Luxembourg, [or] do we need to beef up Frankfurt [operations]. Our money is being spent restudying how it would work.”
Aviva is not alone. Last week, multinational lender Barclays announced plans to officially relocate its headquarters from London to Dublin, shifting 150 employees to its offices already in the city. Seventy-five percent of companies KPMG recently surveyed are considering moving their headquarters out of the UK to avoid tumult should the nation lose easy access to the EU market. (KPMG's study polled 100 CEOs with HQs in Britain.)
Redirection Of Foreign Investment?
After the shocking referendum, it was speculated that a flood of foreign capital usually designated for London would shift to New York as a result, but that has yet to take place in force. While New York still remains the No. 1 market for foreign capital in the world, Berlin seems to be benefiting most from Brexit, jumping to the No. 2 place on AFIRE rankings — its highest ranking ever, according to AFIRE CEO Jim Fetgatter. Fetgatter said a good deal of investment normally allocated to London remained in Europe instead of crossing the pond.
“It’s likely to help the U.S. in the long run,” Fetgatter said.
Parliament Green Light, What’s Next
Now that Parliament has OK’d the bill giving May permission to invoke Article 50 of the Lisbon Treaty and start the formal process to leave the EU, it will return to the House of Commons next week for scrutiny and possible amendments. Once approved, May will have two years to negotiate the UK’s removal from the EU with all 27 nations involved.