Are opinions about a potential ‘Brexit’ consistent across sectors, and what are the implications for UK business? We spoke to a range of UK business leaders to find out.
Our recently published International Business Report ‘The Future of Europe’ indicated that European business leaders are more worried about the impact of the UK leaving the EU, than of Greece leaving the Eurozone.
On average 64% felt it would have a negative effect on Europe, rising to 72% for UK businesses. And while 60% of EU businesses wanted to see further European economic integration, this figure was a mere 30% for businesses in the UK. Despite this, the expected consequences of a Brexit and attitudes towards it vary between sectors and individual businesses. Here are some real world opinions.
Dr Zulf Masters, founder and President of Masters Pharmaceuticals Ltd
Masters Pharmaceuticals specialise in sourcing and supplying products to treat rare diseases in the developing world, with customers in over 90 countries. Around 30% of their products are sourced from EU countries other than the UK.
Company founder Dr Zulf Masters is clear: “It would be a totally negative step. Last year we decided categorically that it would be a negative step for Scotland to leave us, and now we’re thinking of leaving Europe. It’s silly really.”
“At the moment we’re looking to acquire assets in Europe,” says Dr Masters. “If Britain left the EU that might affect our thinking, because administratively speaking it would be more difficult. Also, because of the common regulatory system at the moment it’s easier for pharmaceutical products to be bought and sold on prescription within the EU. If that was severed it becomes an extra burden for us.”
“As a company we wouldn’t leave Europe,” he continues. “In fact the opposite would probably be true – we would leave the UK and go to Europe, because strategically it would be better to be in a market which is bigger and also more harmonised.”
Neil Harris, Chief Financial Officer, EA Technology Limited
EA Technology is a global provider of solutions for the high voltage electricity distribution industry, with offices in Australia, China, Europe, Singapore, UAE and the US. Investment in EA Technology’s solutions enables electricity network operators to increase reliability at lower capex and opex.
“While a substantial proportion of our revenue is derived from exports, the amount represented by EU countries is not significant. I would argue this is because EU regulation including the single market doesn't work effectively to promote access for SMEs in our sector.
Many of our potential customers in the EU are state owned and / or highly regulated and there is a perceived preference for dealing with domestic companies when it comes to goods and services supplied by SMEs. More effective regulation of electricity distribution across the EU together with effective application of the single market would lead to increased EU sales for EA Technology, but there are currently no signs of this happening.”
“There may actually be benefits in a Brexit for EA Technology, because the UK would have greater freedom to sign other free trade agreements with countries where we could probably do more work. One of the biggest inhibitors for us in some countries is withholding tax and the lack of mitigation through effective double tax treaties.”
“A Brexit could also be beneficial in terms of accessing a wider staff pool – for example, it would be easier to recruit high calibre engineers from non-EU countries.”
He feels there would be a short term need to rebalance the economy as quickly as possible as an impact on the volatility of Sterling’s value and the propensity of other countries to invest in the UK. “I think there would be quite a nasty and significant risk of a severe recession in the immediate aftermath.”
However, he points out that the EU has some fundamental problems for business in terms of an ageing population, low population growth and inefficient and unfocused regulation. “I do question why the UK would want to tie itself in to a trading block which is likely to see the slowest growth of any of the trading blocks in the longer term.”
Robert Amis, Partner at Pantheon Private Equity
Pantheon is a leading private equity fund investor with offices in London, San Francisco, New York and Hong Kong. It manages funds for over 400 global clients.
“In my view, it would be undesirable for Britain to leave the EU, because we do so much of our business with Europe,” says Partner Robert Amis. “It is not clear how the terms of trade would change, specifically for us the application of the Alternative Investment Fund Managers Directive, but the larger issues are the uncertainty and economic reverberations both of which would be unwelcome for global financial markets.”
Richard Cooper, Group Finance Director, GVC Holdings PLC
GVC Holdings are an AIM-listed multinational sports betting and gaming group incorporated in the Isle of Man, with licences in five countries.
Group FD Richard Cooper is unfazed by talk of a Brexit: “We’re a very, very international company, and I see that continuing. We’ve got subsidiaries in London, Bratislava, Tel Aviv, Dublin, Montevideo, Malta and Manila, and only two of those are in the Eurozone. Having the euro is a very positive thing for our business, but whether or not the UK remains in the European Union won’t affect our company that greatly.”
“As for the business case for British business more widely, my view is that we are a trading nation. Get a bigger navy – that’s what I would do!”
Off the record
Other business leaders we spoke to were equally forthright in their views, but preferred to be quoted anonymously.
“What we really want is a free trade area, not a domineering federalist movement,” says the FD of a large global chemical business. “What really bothers us is the crassness of some of the regulations and the fact that while they’re implemented very thoroughly in the UK, elsewhere implementation is a lot laxer, so we lose competitive advantage.”
The FD of a global financial outsourcing company didn’t necessarily agree: “Some of the regulations make a lot of sense. For example, we’d still be the dirty man of Europe if it wasn’t for EU environmental legislation. But it’s the silly things about the EU which get all the publicity, not the good things.”
“I think it would be really bad news if Britain left Europe,” he continues. “The EU isn’t perfect, but it makes us part of a major trading block. Not being in the EU would make it much less attractive for companies in general to invest in the UK, and Europe accounts for quite a big chunk of our business with the world.”
But the financial controller of a global security business plays down the impact of an exit, pointing to the importance of other factors including geographical location, transportation links, currency, political stability and the UK’s relatively competitive tax system: “It’s only one of many factors so you wouldn’t take action just on this alone, you’d wait and see.”
“I think even if there was some form of exit the impact would be minimal because European culture and legislation are already quite embedded in the UK.”
The FD of a major UK property developer suggests that a loosening rather than a severing of ties may be the answer: “I think what we really need is a trade agreement with the EU. We have to recognise that we’re a completely different entity from mainland Europe, and we need a solution that reflects that.”