According to a survey conducted by KPMG, an alarming percentage of CEOs are considering shifting bases from the UK to Europe. This comes as a direct aftermath of the June Brexit result. The Netherland-based auditing firm interviewed 100 top CEOs of companies with annual sales revenue of over £100 million or more. According to the survey, 23 of the 100 interviewed CEOs say they are definitely shifting their headquarters out of the UK. The same report indicates that 53 CEOs are seriously considering moving their operational bases outside. That’s a staggering 76% that may end up leaving the UK once Brexit takes effect. The KPMG report was further supported by another survey conducted by PwC. According to the PwC survey, 53% financial services firms believed that the Brexit would negatively impact their firms. Whether Brexit actually creates a negative environment for businesses is yet to be seen. However, it’s certain that companies are wary of how this historic exit would impact their financial future. For now, the British government should really consider going on a trust building mission to fortify confidence.
The economic repercussions of Britain’s exit from the European Union have long been debated by financial analysts. The KPMG survey gives concrete evidence of what analyst and experts have been fearing since the Brexit result. Being part of the EU, firms headquartered in the UK used to get automatic access to the open European market. The exit has left these firms on shaky ground and created an atmosphere of uncertainty. The uncertain tax scenario and imposed regulations after Brexit takes effect is what forcing CEOs to consider moving their production units and administrative headquarters. Businesses already facing tax problems, and further burdened by this uncertainly and many might be closing down. This should come as a grave concern to policy makers as businesses moving outside would raise the unemployment rate and could lead Britain towards economic turmoil.
Moving operational bases and production plants may seem like drastic steps but CEOs can’t really be blamed. They are paid high salaries to forecast future scenarios and execute contingency plans. Once Britain exits, all manufacturers would need to pay taxes to export their products to the European markets as well as pay import duties for parts needed for manufacturing. Jaguar and Land Rover, owned by Tata Motors is expected to take a hit of over £1 billion by the year 2020. This estimate was drawn up considering Tata Motors pays 10% export tax and 4% for importing parts from Europe. CEOs are simply doing their job by seeking out tax havens and comfortable regulatory environments.
Manufacturing companies that cater solely to the domestic UK market should remain unaffected by Brexit. The devaluation of the pound would also mean they would incur heavy losses if they shift their bases outside. However, most major UK-based manufacturers have been capitalizing on the EU’s free trade opportunities. Taking the KPMG report as a warning sign, the UK regulatory bodies need to extensively interact with the businesses community and come up with a plan that’s mutually acceptable. The European Union is Britain’s biggest trading partner and an amicable separation with friendly trade regulations could prevent the projected mass exodus of businesses headquartered in the UK.
