I’ve surprised myself with how long I’ve managed to avoid writing a blog about Brexit. As the drama rages on there seems to be less certainty around the outcome of the negotiations now than there was 6 months ago.
The impact of the UK’s exit will be felt, is already being felt in the world of economic development. Countries like Ireland, Germany, the Netherlands, and France have all seen high-profile companies announce expansions there as they look to downsize their operations in the UK in an attempt to hedge their exposure to the market post-Brexit.
The full extent of the exodus from the UK is yet to be seen, until the country’s trading and travel arrangements have been finalized. Trade between the UK and the EU could be the biggest victim. Within the EU, Ireland has the most exposure to the UK market, with over 10% of the country’s GDP dependent on trade with the UK. This is almost twice as much as the nearest country in Europe – Germany.
Tight and interwoven supply chains across a number of key industries in all three of these countries will be hit hard. One high-profile example is the production of Guinness, one of Ireland’s most famous brands. The drink is produced in Dublin, then shipped by tanker north to Belfast where it is canned, and then shipped back to Dublin for shipping internationally. The company estimates that time lost and customs costs could add €1.3 million in costs per year.
Economic developers in these countries are working hard to support their businesses through this period of uncertainty. In Ireland, the IDA is working to attract companies to the country as an alternative to the UK, and Enterprise Ireland is helping its exporters to diversify their markets.
The UK has continued to see strong investments, albeit mostly in the form of M&A activities – speculation suggests that a weak pound is making these kinds of takeovers more attractive right now. The country remains a very attractive domestic market, with an appealing tax structure, a well-educated workforce, and strong existing clusters in advanced engineering, technology, and financial services.
UK businesses, through the assistance of the DIT, are also working hard to diversify their export markets. Potential independent trade deals with the US, China, and India are providing more hope to UK companies.
As an economic developer, the UK is a rich market to target. With unemployment at the lowest level in 40 years, and the potential outflow of EU citizens, companies across the country may be on the lookout for regions that can boast a strong workforce and educational institutions. If, for example, a trade deal is struck with the US, this would present a great opportunity for US-based economic developers to attract companies that will likely be doing increased business in the states.
Are you considering targeting the UK? If so, where in the UK? Many of our clients are spending much of their time in London, but there is opportunity elsewhere in England, not to mention Scotland and Northern Ireland. All have thriving domestic technology and advanced manufacturing clusters, and if they are looking for growth in the coming years, it will most likely be abroad.
If this market is of interest, feel free to reach out and let us help you find your next prospect!