Just as Prime Minister Theresa May is closing in on a Brexit deal, the march of companies quitting Britain is getting louder.
On one day alone, CME Group Inc. said it’s moving its $240 billion-a-day short-term financing market to Amsterdam from London in another blow for the City, while German ball bearings maker Schaeffler AG announced the closing of two of its three British plants. Hours later, surgical appliances manufacturer Steris Plc said it plans to move its corporate base to Ireland from the UK.
Their timing isn’t as odd as it seems. Whatever May agrees in Brussels, it won’t put an end to the uncertainty that has dogged companies since the referendum in 2016. A deal will buy them time — a two-year grace period will maintain the status quo — but then another cliff-edge will probably emerge in December 2020.
The deal that May is working on is full of fudge and postponed decisions, leaving the UK Cabinet fighting about whether the guarantees Britain is offering could end up binding the country into the European Union’s trading system forever. Companies would be delighted if that were the case, but pro-Brexit politicians are horrified at the prospect. So companies can’t plan in case the Brexiteers get their way — either now or in the years ahead.
Banks were the first to execute their plans, as they were quick to realise that the transition period wouldn’t be legally binding until it was far too late to be of use to them. While it was agreed in principle in March this year, it won’t be set in stone until the divorce deal is inked. The best estimates put that in December — just three months from exit day.
Manufacturers took a bit longer. May had promised them that she would fight to keep trade as frictionless as possible with the EU.
Moving car plants is more cumbersome than moving a few bankers and the investment cycles mean decisions take time. But other companies are now catching up: Recent examples include Smurfit Kappa Group Plc abandoning a plant, Panasonic Corp. moving to Amsterdam and the retailer of Muji products looking for a new base.
UK chemical makers face ‘cliff edge’ on trade after Brexit
The UK’s plan to leave the European Union could lead to a breakdown in the chemicals trade, according to a parliamentary study that warns of risks for industry making ingredients for everything from food to medicines and paint.
The report published on Wednesday provides yet another example of the wide-ranging implications of Brexit for UK manufacturers. Similar warnings have been voiced by a host of other sectors including the car industry as Prime Minister Theresa May tries to hammer out a deal to separate from the EU. In the case of the chemicals industry, the sale of some 16,000 substances is governed by a set of EU rules known as REACH that were put in place in 2007 to allow trade between countries. UK chemical makers initially opposed common regulations. But losing them now under Brexit would add red tape at best and possibly halt supply chains, according to the report.
The government’s suggestion that it can simply “cut and paste” the REACH rules into UK legislation is flawed, it said. Such move is “not credible and raises serious legal concerns.”