Skip to Content

Brexit Has Caught U.S. Companies Completely Off Guard

“Brexit” has been a swift punch to the face for many U.S. companies who knew it could happen more than a year ago, but today are still chaotically scrambling to handle the potential repercussions.

The value of the British pound took a nose dive last week, prompting American firms to rush through orders on foreign currency as CEOs worldwide began bracing for decreased profits, job cuts, and long-term market disruption.

Company executives are anticipating a drop in demand from European economies and many are seeking legal advice on how Britain’s break from the EU could impact trade deals and regulations.

 

The financial services industry worked hard to prepare for this potential economic debacle, but experts say other business sectors have been caught with their proverbial pants down.

International Law Expert Miriam Gonzalez of the London-based firm Dechert LLP told Reuters last week that most companies haven’t prepared for what “Brexit” could mean to their industry.

“It has come as a massive shock and many businesses are struggling to digest that today,” he said.

Some fear the isolationist move by England could compel other countries to leave the EU, which sent global markets into a frenzy Friday.

Potential Effects of Brexit on U.S. Companies

Britain’s EU exit could force U.S. manufacturers with factories in the UK to start paying tariffs on goods sent from the England to EU countries. Those goods would also have to go through customs, adding time and cost to business operations that would favor European competitors.

The increased value of the dollar over the pound makes U.S. goods more expensive in European markets as well.

Musical instrument manufacturer D’Addario & Co, which is based in a Farmingdale, New York does about 30% of its business in Europe. Its CEO Jim D’Addario told Reuters the rising dollar could do serious damage to his company’s bottom line.

“This could lead to the collapse of the whole EU system – that would have a more far-reaching impact,” he said.

“Brexit’s” ramifications don’t stop there. It could also force regulators to re-evaluate intellectual property and branding rights regulations and create human resource challenges for companies based in Britain whose employees may be forced to leave since the automatic right to work in any EU member country would no longer be in place.