Bracing for BrexitFollow @PwC
Author: Bob Moritz , Network Chairman elect, PwC International Ltd.
The global economy has enjoyed tremendous growth and opportunity by expanding the freedom to pursue business success through unfettered market access. This approach is being tested with the United Kingdom’s vote to “Brexit” the European Union. The outcome of this referendum has created uncertainty on a global scale.
The immediate plunge in the world’s major stock markets in reaction is only the beginning. New deals between Britain and its trading partner countries will need to be hammered out, while at the same time its relationship with the European Union is unwound. Legal, political, immigration, and other matters will require years of effort to sort. As a result, the intertwined global economy is now very much in a tangle. Yet, it is important to remember that the British have a very long history of adaptability and innovation when confronted with new challenges and opportunities. The UK’s economic stability is shaken but there’s no question it will remain one of the world’s great financial hubs and top economic powers. The global economy too has faced and overcome difficult challenges, even as recently as 2008. The coming months, however, will require patience from an impatient world as detailed, complex issues are worked through. It will be incumbent on government and corporate heads to provide true leadership through this process.
Confidence begets stability and vice versa. Academics and economists were broadly concerned about Brexit before the vote. The dramatic stock selloff reflects these predictions. Now that Brexit is a coming reality, our experts see fundamental steps forward to mitigate risk and best position business for a prosperous tomorrow. We have developed a series of positions for businesses broken down by industry sector, including sections on economic impact, tax, and global mobility. You can find each of these approaches here. The way forward requires studying on a level of granularity how these changes will impact each business sector specifically. A clear process for every organisation to adapt and evolve for this new market is essential.
This also isn’t just about macroeconomic impact, it’s about higher and better living standards for more people in more places. Changes on those fronts may not be evident immediately, and progress may be stagnant or slow. But government and the private sector can and should now also play a role here. There’s no question that the vote for Brexit stemmed from real anxiety about the direction and impact of the global economy, along with other concerns.
Our world is stronger when there’s more opportunity, not less. For those of us watching from outside the UK, we want to ensure robust, competitive markets around the world for goods and services. The world has truly competitive, big “global” markets creating tremendous business opportunities, whether it is the EU, the United States, China, or other markets around the world. This exit has caused tremors through all the world’s economies that will have to be weathered. The UK will remain a key trading partner for many, though many deals will need renegotiation.
It’s no secret that business investment and activity gravitate toward stability. This vote represents change for better or worse. Certainly, the UK isn’t plunging into darkness. Its economic system remains capitalistic. It is one of the world’s strongest democracies-- evidenced by this vote, in fact.
The timetable for the process of Brexit now will take at least two years. There will be domestic political turmoil in Britain. And its economy will likely suffer in the short and medium term, even if it prospers down the road. The global impact will last for some time. But each element of a Brexit will come into sharper relief as we move forward, uncertainty will give way to new market realities and real opportunities. As a global company, we at PwC will continue to lead by helping our clients work toward this better future, embracing the challenges and seeing potential.
Robert (Bob) E. Moritz is the Network Chairman elect, PwC International Ltd. Read more