The Brexit bill

Money and jobs are leaving the City of London as financial firms rearrange their European operations. Migration from the EU to Britain has fallen, resulting in labour shortages in areas which rely on EU workers. The pound is down by over 10 per cent
ECONOMY - The pound is down by over 10 per cent against the euro since Britain voted to leave the EU.PHOTO: AGENCE FRANCE-PRESSE
Money and jobs are leaving the City of London as financial firms rearrange their European operations. Migration from the EU to Britain has fallen, resulting in labour shortages in areas which rely on EU workers. The pound is down by over 10 per cent
FINANCE - Money and jobs are leaving the City of London as financial firms rearrange their European operations. PHOTO: REUTERS
Money and jobs are leaving the City of London as financial firms rearrange their European operations. Migration from the EU to Britain has fallen, resulting in labour shortages in areas which rely on EU workers. The pound is down by over 10 per cent
ECONOMY LABOUR - Migration from the EU to Britain has fallen, resulting in labour shortages in areas which rely on EU workers. PHOTO: REUTERS

LONDON • Britain's vote to leave the European Union has already come at a cost, regardless of where Brexit goes from here. Some of the damage is tangible, such as jobs, investment and capital; some of it less so, like international clout and talent.

Prime Minister Theresa May's defeat again in Parliament on Tuesday leaves Britain needing to delay Brexit. The EU, though, must agree to it and officials in Brussels have warned that there will be no further renegotiation.

Meanwhile, the threat of economic pain still looms over the country. And the political impasse remains as entrenched as ever, even after Parliament also voted to avoid leaving the EU without a deal.

Here's a look at where the biggest impact has been so far.

THE ECONOMY

The vote to leave the EU in June 2016 has cost the United Kingdom about £800 million (S$1.44 billion) per week, or about 2 per cent of total economic output, Bank of England policymaker Gertjan Vlieghe said last month.

Optimism among firms is at its lowest in seven years, according to Lloyds Banking Group, and businesses have recorded the longest continuous decline in investment since the global financial crisis a decade ago. Not all of this investment will be recovered even if there is a smooth exit process, the central bank warns.

The pound is down more than 10 per cent against the euro since Britain voted to leave the EU. That has increased the cost of imported goods and services, boosting inflation and eroding purchasing power for consumers. British exporters, meanwhile, have failed to take advantage of the weaker pound to grow their market share.

FINANCE

Money and jobs are leaving the City of London as the world's biggest financial companies rearrange their European operations to protect business.

Five of the largest banks looking to serve the EU are transferring €750 billion (S$1.15 trillion) of balance-sheet assets to Frankfurt, according to people familiar with the matter. They have had to move capital to get continental approval to continue providing services across the bloc.

While fewer bankers have left London than first estimated, moves are being made. The world's biggest banks have outlined plans to transfer several thousand staff to cities such as Paris, Dublin and Madrid. Those personnel shifts are likely to be irreversible, according to TheCityUK, a lobby group.

At least 275 finance companies have moved or are moving some of their business, staff, assets or legal entities to the EU from the UK, according to the London-based think-tank New Financial.

LABOUR

Net migration from the EU to Britain has fallen to its lowest level in a decade, according to the Office for National Statistics.

That has hurt the hospitality industry, farming, construction and the National Health Service, which all face labour shortages and have traditionally relied on EU workers.

The UK's buoyant job market is showing signs of Brexit jitters, with the number of people placed in permanent jobs falling in January for the first time since the 2016 vote to leave the EU.

Then there is higher education. Many are concerned about the impact on international student enrolment and cross-cultural exchanges and learning programmes within the EU. Heriot-Watt University in Edinburgh in part blamed Brexit for job cuts in 2017, while Manchester University also cited the uncertainty when announcing the need to reduce costs.

HOUSING

Brexit is having a chilling effect on the UK housing market. Realtors say prices fell in the four months to January, pushing the Royal Institution of Chartered Surveyors' headline price index to its lowest since 2012. Inquiries, sales and new instructions were also down in January, according to the surveyors' institution.

The weaker property demand has hurt home-builders, while the weak pound has pushed up the cost of imported materials and the sector's labour supply could be hit by a cutback in immigration.

AUTOMAKERS

Brexit is completing a perfect storm for automakers.

With the looming prospect of potential tariffs and supply bottlenecks, and already struggling with declining diesel sales and a shift to electric cars, Jaguar Land Rover Automotive announced it would cut 4,500 jobs, mostly in the UK.

Nissan Motor scrapped plans to build the X-Trail sport utility vehicle in Sunderland, north-east England, and Honda Motor said it will close its only British factory in 2021.

Brexit uncertainty has also harmed investment. Spending by carmakers on projects like upgrading machinery and factories fell to the lowest since the financial crisis in 2018, according to the Society of Motor Manufacturers.

MEDIA

Advertising-reliant media companies like ITV, Britain's biggest free-to-air commercial broadcaster, have suffered due to firms cutting marketing budgets to preserve profit margins. A bellwether for sentiment among UK firms, and also under threat from Netflix and Amazon, ITV's shares are down 40 per cent since the Brexit vote.

Newspapers such as The Guardian and the Brexit-backing Daily Express are feeling the pinch too, while the industry was stockpiling newsprint and ink to protect against Brexit disruption. And international media firms like Discovery have been relocating their European headquarters in the continent to ensure they can continue to beam channels across the EU.

TRADE

Importers are having to spend money on warehousing and extra storage facilities as they build Brexit stockpiles, worried about potential disruptions to goods coming in. They are spending on building new IT systems to handle trade and employing Customs advisers.

Exporters, such as British meat firms, are starting to see orders cancelled because overseas buyers do not want to run the risk of rising costs due to new tariffs or delays at ports.

CREDIT

Uncertainty about the pound and the economy has exacerbated a decline in the sterling's role in global credit markets. Overseas non-financial firms sold only £7 billion of notes last year, less than half the amount issued in 2017, according to data compiled by Bloomberg.

Sales of pound-denominated corporate bonds had their longest drought in nearly two decades at the end of last year, as borrowers shied away from a market rattled by Brexit uncertainty. The cost of insuring the subordinated bonds of major British banks has also been rising in recent months.

STATUS

Britain's position as the European hub of choice for international business has taken a blow.

Japanese electronics giants Sony and Panasonic, insurer Chubb and money-exchange firm TransferWise are among firms which have moved their EU headquarters or set up new subsidiaries.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 15, 2019, with the headline 'The Brexit bill'. Print Edition | Subscribe