European business leaders predict that a Brexit would adversely affect their business and claim that the UK should be ‘punished’ if it votes to leave, according to a new report from global law firm, King & Wood Mallesons.
The report, The View from Europe, captures the European business perspective and explores how a decision to exit the European Union would fundamentally and irrevocably affect how Europe does business with the UK.
King & Wood Mallesons conducted independent market research, surveying 300 senior in-house counsel from listed companies in France, Germany, Spain and Italy to ask how European businesses felt about the prospect of the UK voting to leave the EU.
Alan Houmann, Head of Government Affairs for EMEA at Citi, said, “This is a very interesting and informative contribution from KWM, which helps to bring important evidence from the rest of the EU into the debate.”
Impact on Business
Overall, 68% of respondents agreed that a Brexit would adversely affect their business, with negative effects including less UK investment in European business (63%); introduction of new custom duties for UK goods and services (59%); greater barriers to access UK markets (46%); and heavier tax burdens on EU companies (38%).
In addition, the majority of EU companies (62%) said that they would be less inclined to do business with UK entities as a result of a Brexit.
Stephen Kon, senior partner of Europe & Middle East at King & Wood Mallesons, said, “This is the biggest macroeconomic and political decision in a generation and it’s important that we consider all aspects of the debate. We have studied the ramifications of Brexit for European businesses and consumers, and we have looked at how a decision to leave the EU would affect sentiment towards the UK more generally.”
Impact on UK Trade Relations
King & Wood Mallesons’ research reveals that 67% of respondents felt their governments should negotiate a trade deal with the UK if it votes to leave. This percentage drastically increases for larger companies with a turnover of $5 billion or more, with an enormous 85% wanting their governments to negotiate a trade agreement. Crucially, however, 62% of all respondents believe that such trade agreements should penalise the UK through new custom duties or other barriers.
Impact on Europe’s Future
European business leaders were split as to whether the EU was in need of reform. The biggest threats to the future stability of the EU were revealed as migration disputes (58%), restrictive regulation (51%), too many countries leaving the union (49%) and the weakening of the euro (48%). However, when asked directly, 69% of respondents said if the UK leaves the EU, it will set a precedent for others to leave.
Only a small majority (51.3%) felt the EU makes their business more competitive, and many respondents were of the belief that regulation was in the greatest need of reform.
“There is a need to reform. The EU has become a large organisation and a regulatory authority, rather than living the original European ideals of unity, harmony and solidarity," said Lars Reubekeul, Frankfurt Real Estate partner at King & Wood Mallesons.
“If the UK departs, we’ll need different checks and balances than now and those may well make the EU far less efficient. A Brexit would insofar be a step in the wrong direction at the wrong time, when the EU should – on the contrary – be strengthening in terms of global competition. In the aftermath of the financial crisis, the European financial markets need a strong union at times like these, not a weakened union,” said Christian Cornett, Frankfurt Corporate partner at King & Wood Mallesons.