What's next for businesses after Brexit?

A Dublin bar with its specially brewed Brexit beer "Big Mistake". But not all is lost, judging by how some firms are faring.
A Dublin bar with its specially brewed Brexit beer "Big Mistake". But not all is lost, judging by how some firms are faring. PHOTO: REUTERS

LONDON • In the run-up to Britain's vote to leave the European Union, the two sides of the referendum debate had diametrically opposing views of the economics. Was voting for Brexit casting a ballot in favour of recession, or a vote for financial freedom?

Nearly two months since the referendum, little is clear. Here is how the Brexit vote has shaped business so far.


The effects of the Brexit vote have been felt most sharply in the markets.

The pound has plummeted, and is 10 per cent lower against the dollar compared with a year ago. Mutual funds dependent on the country's property sector have felt the strain - real estate funds run by Aviva Investors, among others, shut their doors as panicked customers sought to withdraw their cash en masse.

Stocks, however, have been more resilient. After falling sharply in the wake of the referendum, Britain's benchmark share index is now comfortably above its close on June 23, the day of the vote.


The steep fall in the pound has changed merger calculations for companies around the world. In the case of Qatar Airways, the cheaper pound has created a bargain, as the airline increased its stake in the parent company of British Airways, citing "an attractive opportunity".


The British economy appears to be feeling the pressure since the June vote. The Bank of England has cut rates to their lowest level in the central bank's 322-year history and slashed its growth forecasts. Surveys indicate consumer confidence, purchasing-manager sentiment and the services sector have plummeted.

And amid all the uncertainty, some businesses are putting off major decisions, at least until they can get more clarity. Two-thirds of companies surveyed by Credit Suisse after the referendum said they were going to either postpone or reduce their spending in Britain in the next six months.


Before the referendum, some warnings over corporate profits were dire. The reality, since the vote, has been more nuanced.

Businesses in a variety of industries - including low-cost airlines and retail banks - have predicted Brexit will take a bite out of their profits and result in job cuts. Companies associated with the property market have been under heavy pressure, as profits at Foxtons, a major London-centric real estate agency, have tumbled.

But it is not all bad news. Some companies have done well because of Brexit. Chief among them have been some major British newspaper publishers. The Daily Mail & General Trust, which publishes The Daily Mail, experienced a sharp rise in traffic and digital advertising.

Watchmaker Swatch has said the vote led to a surge in luxury watch sales, while Scotland's whisky sales have risen as well.


Despite the uncertainty, some companies have poured even more money into Britain.

Pharmaceutical giant GlaxoSmithKline has said it will invest about US$365 million (S$494 million) in its British manufacturing sites, while French utility EDF has approved a US$24 billion project to build a major nuclear power plant in Britain.

The site, known as Hinkley Point C, will provide 7 per cent of Britain's electricity when complete. But the government of the new Prime Minister, Mrs Theresa May, has said it is reviewing the project, drawing the ire of France and China, the nuclear plant's major backers.


A version of this article appeared in the print edition of The Straits Times on August 23, 2016, with the headline 'What's next for businesses after Brexit?'. Print Edition | Subscribe