Monday, November 29

Why for many British companies Brexit has already happened



In the political realm, no one knows how Brexit’s long running theater of the absurd will end. But for much of the business world, Britain’s departure from the European Union has effectively happened.

Nearly three years of uncertainty since the June 2016 referendum has forced companies to plan for the worst the prospect that Britain could crash out of the bloc without a deal governing future relations.

The twisting road to Brexit has already slowed economic growth, discouraged investment and damaged the reputation of the nation as a haven for commerce.

Global banks and other financial services companies are steadily shifting thousands of jobs and more than $1 trillion (£766bn) in assets to European cities to ensure that they are able to serve customers across the English Channel regardless of the rules that national regulators impose after Brexit.

Japanese automakers have scrapped plans to expand in Britain, in part because Brexit undermines the country’s virtues as a hub for European trade.

Whatever comes next a deal with Europe, an unruly exit or another vote that could cancel the proceedings, making Brexit the mother of all mulligans the jobs and the money are unlikely to return.

The deadlock only deepened on Monday, as Britain’s Parliament failed to reach consensus on the latest Brexit proposals.

If Britain leaves the European market, it will lose the benefits of the bloc’s trade deals. In short, just as Japan and Europe are liberalizing trade with each other, Britain is moving to impede trade with both.

The big worry is investment, said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, an industry trade group. Investors are just waiting to see, is it worth continuing to commit to the U.K. automotive industry?

The British economy is now 1 to 2.5 percent smaller than it would have been without the Brexit vote, economists estimate. Much of the damage has come via the drop in the British pound, which has shed more than 10 percent of its value against the dollar since the referendum.

The fall in the pound amounts to the market’s expression that trade has been obstructed. Britain sells nearly half of its exports within the European Union.

Across Britain, business investment is expected to decline by 1 percent this year, in what would be the weakest performance since the global financial crisis a decade ago, according to a recent forecast from the British Chambers of Commerce.

Britain’s departure from the European market would end the so-called passporting rights that have allowed financial services companies to conduct transactions across the bloc as if it were one sprawling country.

Financiers recognized early that they could not merely wait and hope that the politicians would find a way to protect their industry.