European businesses brace for post-Brexit scenario
MARSEILLE // When Sebastien Fontanges, who heads a removal company running weekly trips between London and Paris, went to bed on the night of Britain’s referendum on the European Union, the latest projections suggested a comfortable win for Remain.
He slept soundly, only to awake to the news that the UK electorate had made the historic choice to leave the 28-nation bloc. It is a decision that Mr Fontanges, 41, bitterly regrets and leaves him pondering the future direction of his company Delahaye Moving, based in the Parisian suburb of Carrieres-sur-Seine.
“I am not sure at all what will happen,” he says. “Europe needs the stronger countries and is losing one. It cannot be a good thing.”
The Brexit equivalent of the “phoney war” that preceded the outbreak of serious hostilities in the Second World War is over. The details of withdrawal may take many months – even two years – to resolve but the first tremors are already being felt.
Francois Hollande, France’s president, has struggled to overcome business’s suspicion since declaring in 2012 that his only true enemy was money. Now, his government has mischievously unfurled a red carpet, offering to welcome finance companies tempted to desert the City of London. The gesture mockingly recalls similar overtures from Britain after the Hollande statement.
Britons complain that the sharp post-referendum decline in sterling has whittled away holiday spending money. And on both sides of the English Channel, companies are anxiously trying to assess the longer-term implications for them and their employees.
“I was really shocked,” Mr Fontanges says. “It means enormous change for everyone – Europe and the UK.”
His business relies on the Paris-London-Paris runs for 20 per cent to 30 per cent of its activity and employs a dozen or more people in each capital. Many clients are the families of people working in banking, making career moves between the cities, and they face an uncertain future as the markets assess what Brexit means for trading and confidence. No one can even be sure how the sector’s employees themselves will be affected by possible restrictions on the free movement of labour guaranteed within the EU.
Mr Fontanges says there could be long-term benefits for his company if the Brexit fallout led to more removals between France and, for example, the German finance centre of Frankfurt. He believes the UK could be harmed more than the European partners from whom it has decided to separate.
“When I think of Boris Johnson [former mayor of London prominent in the pro-Brexit campaign] coming to Paris and telling us London was the sixth or whatever French city, because so many French people work there, and then supporting Leave for his own political purposes, I just think ‘wow – it’s not just a big mistake but crazy’. He convinced so many people to follow him.”
In the south London production studio of Rose and Willard, which specialises in designs for professional women, the owner Heidy Rehman received one immediate bonus from the plummeting pound – an unexpected £500 (Dh2,378) order from Germany.
More broadly, Ms Rehman acknowledges widespread “fear and uncertainty”. She buys fabrics from Japan and Italy, for example, and the exchange rates since Brexit make them much costlier.
Ms Rehman, 45, was a stockbroker for 14 years, including more than four years in Dubai before she returned to the UK and set up her business, which claims “the lowest carbon footprint in the industry”. She has made items for celebrities such as Jennifer Aniston, Gemma Arterton and Michelle Dockery.
She says the evidence from fashion shows suggests products can no longer be displayed six to nine months before delivery. “Customers want to buy immediately and brands may have no choice but to produce closer to home, or better still, the UK,” she says. “Long global supply chains may soon become unworkable. The downside to this is clearly inflation, as brands will need to look to pass on higher input costs to customers.”
She calls on politicians, especially pro-Leave figures who claimed cutting red tape would reduce costs, to match their words with actions to help entrepreneurs and manufacturers win back trade lost to globalisation.
An issue of concern to Ms Rehman is the debate’s threat to free labour movement, since she employs highly skilled machinists from Lithuania, part of the EU, and does not believe she could easily replace them with British staff.
Among bigger businesses, there has been a mixed response. The consultancy PricewaterhouseCoopers estimated in April that 70,000 to 100,000 jobs in the financial sector would be jeopardised by Brexit, and the US investment banker JP Morgan Chase is already talking about relocating thousands of jobs if the eventual withdrawal deal harms banks.
But after meeting George Osborne, the British finance minister, a group of bankers including representatives of JP Morgan said government and industry shared “a common aim to help London retain its position as the leading international finance centre”.
The French bank Société Générale and the plane manufacturer Airbus have pledged to maintain their activities in Britain, while openly regretting the referendum result.
France’s national association of food industries says dairy and wine sales will be severely affected. French food products worth €4.54 billion (Dh18.42bn) were exported to the UK last year. The more the pound falls, the more the French agriculture industry will suffer. Further, the association fears the possibility of new import tariffs.
The UK is France’s fifth-largest market and the worst-case scenario is that Brexit could cut French exports by €2.9bn, according to a report before the referendum from the insurance company Euler Hermes.
Olivier Campenon, the French president of the Franco-British Chamber of Commerce and Industry, refuses to be downcast even though he started his new role on the day of the referendum.
“It was a great shock, a real tsunami because we cannot say when it will all stop,” he says. “But I am confident that just as business relationships between France and the UK existed before, they will continue to exist tomorrow.
“We need openness on the progress of Brexit negotiations between the UK and EU. But France and Britain have fought against each other and side by side. When you have been enemies you can become good friends and that is the case. I am sure our great historical bond will not just be destroyed.”
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Updated: July 10, 2016 04:00 AM