Restrictive Covenants

What Does Brexit Mean for Corporate Mobility

Brexit – In a move that has shocked the world, the people of the UK have voted to leave the EU. It seemed like a long shot before the vote, and now that it’s happened everyone seems to be scrambling to figure out what will happen next. In fact, there seems to be confusion on all sides – after the vote, UK Google searches for the phrase “What is the EU?” spiked, according to The Washington Post. Meanwhile, stock prices fell across the globe and the British pound fell nine percent in under two days. Thus far it seems like only one thing is clear: The next few weeks and months will be filled with anxiety and uncertainty as to what the final result will be for Britain’s exit.

Many American corporations do business within the UK. They also use their position on the British Isles as an important stepping stone for entering European markets. With the UK’s departure from the EU, those connections to Europe begin to tatter. CNN reported that some major companies could opt to leave the UK in favor of relocating to a more stable European country like Germany or France. In that way, Brexit could mean an uptick in the number of businesses on the move. The potential for recession is enough to send foreign companies scattering.

If businesses retreat to Europe, it will leave many Britons jobless. That in turn would cause even more economic instability within the UK. The pound could drop further, and it could drag the dollar with it. As CNN pointed out, the UK is one of the US’s largest trading partners – instability in one country will inevitably affect the other. One only has to think back to America’s 2008 economic collapse to remember how one economy can impact others.

It’s unlikely that many US based companies will move to the UK any time soon. While it’s true that the US dollar may become stronger than the British pound, the threat of recession is too great to make moving a business there safe. Even trading with the country will be confusing for a time. CNN reported that the US government is already trying to negotiate new trade deals with Europe. All of this uncertainty means investors will be hesitant to make deals, especially those directly related to Europe or Britain.