PERISCOPE

 A method by which an observer can see things that are otherwise out of sight

Brexit: "Should I stay or should I go now?"

The rock band The Clash captured it perfectly:

Should I stay or should I go now?
If I go there will be trouble
An' if I stay it will be double
So come on and let me know...

The United Kingdom's recent advisory referendum vote to leave the European Union raises many questions, most of which are unanswerable at this time. No one likes uncertainty, least of all the corporate world.  Now that the UK has made its decision to go, companies with operations in the UK must decide whether to stay or go. 

A few days ago, Rene Buck, President and CEO of Buck Consultants International (BCI) -- BLS & Co.'s European partner firm -- hosted a webinar for companies trying to understand what Brexit means for current and future location strategies. According to a BCI survey of large US companies with European headquarters in the UK, 1 in 8 reported they will likely move that operation to another European location. However, the potential impacts of Brexit won’t be limited to headquarter locations. Changes in labor migration, market access and tariff structures will impact a variety of operations.   

Key take-aways from BCI's webinar were:

  • Don't panic. Yet. There are many potential exit outcomes, but because it will take considerable time to work through these scenarios, the UK's relationship with the EU will remain unchanged for at least the next two years. 
  • Don't expect the future to be clear for at least 30 months. Do prepare to live with that uncertainty, and use the time for contingency planning.
  • One thing we do know is that the tariff structure will change.  We just don’t know how, because we don’t know what kind of relationship the UK will have with the EU.  It could be Most Favored Nation Status; it could be a customized bilateral agreement…. But the extent to which the new tariff structures differ from the current structures under the EU is the key factor regarding the impact Brexit will have on a given company's operations.  Thus, Rene advises companies to model various scenarios and build a fuller understanding of the potential ramifications. If they could be severe, it makes sense to start looking for ways to mitigate the impacts.
  • Migration status between the UK and EU is a big unknown. As with tariffs, there is no way to predict what kind of migration arrangement will ultimately be negotiated between the UK and EU, but it could have dramatic effects on the ability to recruit and retain foreign talent. Companies will want to assess various outcomes to gauge the sensitivity of their own operations to potential changes in migration laws.
  • Companies in certain industries -- most notably banking and insurance -- are currently allowed to "passport" throughout the EU.  In other words, once established in an EU location, they are allowed to do business from that base throughout the EU. A UK departure from the EU could mean these organizations must establish additional locations in order to do business throughout both the UK and EU.

Rene's advice to companies in this time of uncertainty is sound. 

  • Take the time to assess the potential impacts of Brexit on your operations. 
  • Consider what that means for your location footprint. 
  • Implement a location strategy for needed changes.

Brexit will have dramatically different effects not only for each industry, but also for individual companies even within the same industry. While it’s impossible to have full clarity at this juncture – actually, BECAUSE it’s impossible to have full clarity – it’s vital to invest time in understanding the potential outcomes and planning how to mitigate any negative impacts.

 

Tracey Hyatt Bosman is a Managing Director at Biggins Lacy Shapiro & Co., one of the largest, most highly regarded site selection and incentives advisory firms in North America. BLS & Co. helps manage the complexities associated with finding optimal location and securing incentives to support new ventures.

Connect with Tracey on LinkedIn or on Twitter @HyattBosman or contact her directly at tbosman@BLSstrategies.com.

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