Brexit's Global Business Impact

The UK votes Thursday in a referendum on whether to leave the European Union, or “Brexit.” Recent opinion polls have highlighted the rising likelihood of a “Leave” majority, but FSG’s analysis of past UK polling flaws leads us to believe that a vote to stay in the EU remains most likely. Either way, the vote is likely to be narrowly won.

Regardless of the vote’s outcome, the ripple effects of such a closely fought contest will disrupt Britain’s policies toward trade and immigration, and further erode support for established regulations across Europe. Multinational companies will need to revisit their strategies for the short- and long-term.

Despite FSG’s expectation that Britons will not vote for Brexit, business leaders should consider the acute consequences of a “Leave” vote:

1. Financial market volatility and currency depreciation—Recalibrate customer demand and margin expectations as the pound and euro lose value against the dollar
2. Ripple effects of UK and European investment slowdown—Markets with strong ties to the EU (Eastern Europe, North Africa, parts of Asia) would suffer from declining demand for their exports
3. Reversal of open markets within Europe—Supply chains, labor and wage plans, and organizational hubs should be reassessed given changes to trade agreements, Schengen Area travel, and immigration policy
4. Political instability—Galvanized anti-EU sentiment could bring less-predictable populist parties into more European governments, potentially opening up unexpected regulatory debates

For more analysis of the practical effects of Brexit on business, see my new posts on the National Association of Corporate Directors and Frontier Strategy Group blogs, or listen to our EMEA team’s podcast, Brexit: What Does It Mean For Your Business.