Brexit has Britain in an uproar. Even though the controversial vote to leave the European Union took place some time ago, we haven’t seen much in the way of big changes. However, the deadline for trade renegotiations is fast approaching, and officials are scrambling to make deals. It’s likely that changes will happen before 2020. So, what exactly does this mean for Britain’s businesses?
Financial Sector to Falter Following Brexit Implementation
Banks are the backbone of any economy, and Britain’s are no different. Unfortunately for the U.K., British banks are intricately tied to the rest of the European Union via the system of passport rights, allowing them to do business freely and without restrictions in the EU.
This means that U.K. banks have every right to sell services unrestricted to foreign entities, both financial and otherwise. The EU has made it clear that after Britain’s departure, these passport laws will no longer be effective. How will this impact U.K. banks?
In 2014, the British Bankers’ Association estimated that U.K. financial institutions exported 20 billion pounds worth of financial services to entities outside the U.K. It’s possible that U.K. banks could lose much of this business.
Foreign entities wishing to buy financial services in the U.K. will theoretically still be allowed to do so, just not as easily. The laws governing business between the U.K. and the EU will become much more restrictive. Given the option to submit to stricter regulations or buy services from non-British EU competitors, many institutions will undoubtedly choose the latter.
This will affect the U.K.’s business with non-EU countries such as the United States as well. As it were, non-EU countries could have subsidiaries in the U.K. and consequently sell their services to the rest of the EU without the same restrictions they would have in their own country. Since Britain will no longer be a part of the EU, many of these subsidiaries are expected to abandon their U.K. offices for locations within the EU to make for easier trade. The outcome? Thousands of jobs and millions of pounds could be lost.
What might happen to UK-based financial institutions in the wake of Brexit explained
Real Estate and Construction Could Be on the Line
Both the construction and real estate sectors in Britain have long been connected to foreign nationals and investments. Losing the EU passport rights will mean big changes for both these industries.
The construction industry within the U.K. relies heavily on the open-border policy of member countries. Free movement of construction materials across the EU is essential for maintaining the market as is in Britain. With new restrictions imposed, prices could as well ? and nothing stands to get cheaper.
Brexit’s effect on the U.K. construction industry may be detrimental
This rise in the cost of building will drive many companies away from U.K.-based projects and toward the EU with its free movement and potentially cheaper construction costs. Many U.K. construction companies rely on EU countries to provide labor for massive projects. With free movement restricted, many non-U.K. nationals currently working or planning on working in Britain may face problems. Brexit could potentially decimate Britain’s construction workforce and the general construction economy.
Infographic by Office of National Statistics UK (upload Chris55)
Immigration to Britain has been on the rise for decades, but stricter regulations threaten that.
What it Means forOnline Commerce and Entertainment
E-commerce will be majorly affected by Brexit. The EU makes up over half the market for British retailer purchasing. The loss of free trade across the borders of the EU will limit the amount of trade between U.K. online businesses and member states. It could also cause European consumers to look elsewhere for their products.
Britain’s e-commerce could be hit hard after Brexit
Fluctuations in the value of U.K. currency is causing uncertainty among U.K. buyers and sellers alike. Online retailers experienced a significant decrease in their currency value in recent U.K. history following the Brexit vote, and the result was a staggering drop in business. While business has since picked up, the long-term effects of diminishing free trade laws on U.K. online retailers remains to be seen.
E-commerce doesn’t just include clothing and jewelry stores. Other e-businesses like online betting and gambling will be affected as well. In the past, the growth of online casinos changed the entire industry in the U.K., allowing immense international growth and expansion beyond British borders. Brexit may change that.
Online gaming does not operate the same way as other avenues of e-commerce in the EU, as each EU member state has individual laws governing online casinos and gambling. This is another reason why many in the industry are holding their breath as they wait for the results.
Following the implementation of Brexit, there’s a chance these online poker venues will lose their rights to operate within the EU. U.K.-based online gambling corporations, as well as Gibraltar-based corporations, stand to retain British operations licenses. With the coming implementation of Brexit, they could lose their EU licenses and their rights to operate across European borders. Online gaming in the EU is an industry with a market value of ?13 billion. ?3.5 billion of that comes from U.K. and Gibraltar-based companies. The disruption of this stream of revenue will be a massive shock to the industry.
Although many have come forward with predictions, it’s impossible to know the real effects until after they take place. We’ve seen a significant decrease in the value of the pound, which has since recovered substantially. It’s also possible the U.K. will be able to bounce back from whatever ill-effects Brexit has on the economy.
