While many British voters are focusing on how the UK would fare outside of the EU if it votes to leave next month, and whether the average Brit would be better or worse off, we were interested to hear what business leaders in the rest of Europe are making of the UK's dilemma – and the impact a decision to leave would have on them. So King & Wood Mallesons surveyed 300 in-house counsel from listed companies in Germany, France, Spain and Italy over a three week period in March. (Click here to see the full results.)
The headline finding is that more than two-thirds of those surveyed felt that a decision by the UK to leave the EU would have an adverse effect on their business, with the French apparently most concerned. Among the main worries were fears that investment from the UK into European firms would suffer, and the possibility that tariffs on exports to the UK would hit sales, while the larger contributors to the EU budget feared that they would have to make up the shortfall left by a Brexit.
However, potential upsides were identified for domestic economies more generally, and for certain types of business: some international investment might move away from the UK to the remaining EU states, perhaps particularly Germany, while other EU capitals might benefit from the shift of some financial services business away from London. As our recent legal assessment of the impact of Brexit demonstrated, losing access to the single market in financial services – and, in particular, the benefits of passporting – would probably require some London-based financial institutions to restructure.
Our survey also highlighted real concerns among EU businesses that a UK departure could set a precedent for others, foreshadowing a rush to the exit door. Perhaps for that reason, while 67% of respondents supported a trade deal between the EU and the UK in the event of a Brexit, only 25% of respondents felt that a deal should be made on similar terms to those enjoyed by EU members, with the rest favouring either no deal at all, or one which imposed tariffs or trade barriers on UK exporters. Interestingly Italian businesses were significantly more hardline than the other three countries surveyed, with just 17% arguing that the UK should retain access to the single market on similar terms, but even in Germany – which will play a leading role in any future trade negotiations – 75% wanted the EU to impose less favourable trading terms. This finding may give pause to those Brexit supporters in the UK who are arguing that the rest of the EU would want a free trade deal with Britain to preserve an important export market: perhaps the stability of the Union is a more important consideration.
The UK will go to the polls in around six weeks' time, and – although the bookmakers still firmly expect a remain vote – the indecision is clearly bugging some: private equity deal activity is down in the UK, and KKR's Johannes Huth was recently reported as saying his firm is sitting on its hands until the votes have been counted. That lull is probably temporary, whatever the outcome, but what is clear is that, as well as shaping Britain's place in Europe for at least a generation, a Brexit would also have major consequences for those who remain.