Brexit: As the U.K. Leaves the EU, Companies Are Leaving the U.K.

 

Jathan Janove, J.D. By Jathan Janove, J.D. February 22, 2019
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​Brexit, the impending withdrawal of the United Kingdom (U.K.) from the European Union (EU), is scheduled to occur on March 29. What effects are being felt? Uncertainty for employers and workers, to be sure, though some companies are moving ahead with plans to relocate from the U.K. to the EU as EU citizens express reluctance to work in the U.K. British Prime Minister Theresa May still hasn't been able to persuade the British parliament to approve a deal to finalize the details of Brexit, leaving businesses wary. And EU citizens contemplating working in the U.K. wonder if they will be discriminated against because they are immigrants.

"Uncertainty is holding back important decisions on investments and location," according to Peter Damberg, senior vice president of human resources, corporate communication and sustainability for Toyota Materials Handling Europe in Stockholm. "Some bigger cities, such as Frankfurt and Paris, are already trying to compete for financial actors to relocate their headquarters from the U.K. At least two Japanese banks are currently moving operations partly from the U.K. to Germany."

Other companies have also announced plans to move out of the U.K. Panasonic, for example, announced that it is moving from London to Amsterdam, and 34 percent of the companies EY monitors have stated that they will move some operations or staff from the U.K. to the EU.

"Insurance giant Lloyds of London announced in May 2018 that it had received approval from National Bank of Belgium to establish an insurance company in Brussels. The company stated it was a move to enable it to continue working with its EU partners post-Brexit," Damberg said.

Impact on U.S. Companies

However, Simon J. McMenemy, managing partner in the London office of Ogletree Deakins International LLP, said the exodus may not be that extreme. "Many U.S. companies like to headquarter in the U.K. because of shared language, time zone, relatively flexible workforce and employment laws, good airport connections, [and] London's international influence," he noted. "None of these factors will be affected by the U.K. leaving the EU, at least not in the short term."

Furthermore, London's business day overlaps with those of other global financial markets, the Financial Times observes.

McMenemy foresees more of an impact for facilities, rather than company headquarters. "It is really the logistics sites and manufacturing sites which will be harder hit," he said.

EU Citizens Are Apprehensive

EU citizens living in the U.K. aren't certain how comfortable they will feel working in the country after Brexit. May has repeatedly assured EU citizens who are already there that she wants them to continue to live and work in the U.K. McMenemy observed that "there will be some bureaucracy involved in being able to officially remain in the U.K.; however, the government has confirmed that there will be no cost to the EU citizen in doing so."

But Damberg said people in the EU have lost some interest in the U.K. as a place to live, work or even visit. "There is a disappointment about the U.K. position and direction that might have an influence for quite some time," he said.

McMenemy noted that "Just as with U.K. workers and businesses, it is the uncertainty of what Brexit will actually look like that is causing anxiety among EU citizens in the U.K. There are also reports of some EU citizens living in the U.K. feeling that they are no longer welcome.

"Although this is hard to confirm or quantify, undoubtedly Brexit has unleashed strong emotions which affect how people on all sides feel about the EU, Europeans [and] immigration," he said.

Damberg added that "Uncertainty, withdrawal or isolation from global presence and participation does not attract global talent."

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Net migration to the U.K. from other EU countries has fallen sharply since the June 2016 Brexit vote. However, McMenemy noted that this has to some degree been caused by the devaluation of the British pound sterling against the euro, which itself was caused by the shock resulting from the referendum.

"Put simply," he explained, "a Polish plumber can now live as well in Poland or other European countries as he can in the U.K. and therefore may no longer choose to live away from family and friends for reasons of earning capacity."

How are U.K. citizens working in the EU dealing with Brexit? "U.K. employees and people that are spending time abroad living and/or working seem at a high extent to regret that the Brexit issue ever occurred," Damberg said.

The British parliament has yet to finalize a deal on Brexit, and speculation is growing that the March 29 deadline may be delayed, if EU officials agree to a three-month extension.

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