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Exodus? Will Businesses leave the UK if we vote for Brexit?


Both campaigns have been trying to show that UK businesses favour either Brexit or British membership of the EU. But businesses are not homogenous, and it seems that opinion is very much split. A British Chambers of Commerce survey showed that 54% of businesses want to remain in the EU whereas 37% want Brexit.

This might on the surface appear to show a majority in favour of remain. Yet the survey showed certain nuances: exporters (especially to the EU) are more likely to want to remain than non-exporters, and the smaller the business, the more likely they are to desire Brexit. Whilst this is slightly revealing, there are also exporters and big businesses who want the UK to leave the EU. Because there is huge variety in the types of UK business, their motivations for expressing a specific view are diverse, and will largely depend on the particular exit arrangement. The argument that all businesses back one campaign isn’t nuanced enough, nor is the argument that large businesses back remain and smaller businesses back Brexit. It is important to understand why businesses have expressed these preferences.

Below we try to give this nuanced analysis, looking at why some companies have been vocal in the EU referendum debate, what this view is based on and answer the key question: whether it’s likely they would leave the UK after Brexit.

Financial services

Many large banks have hinted at transferring some operations to the EU if the UK voted to leave. HSBC suggested it would move 1,000 jobs from London to Paris. American banks, such as Goldman Sachs and JP Morgan, and European banks, such as Deutsche Bank, have also hinted at moving some of their operations to the eurozone. However, none have said they will definitely leave the UK altogether if there is a Brexit.

Many of these banks support Britain’s EU membership, some even funding the Remain campaign,[1] because leaving the EU could lose Britain its ‘passporting’ rights. These allow British-based financial institutions to conduct their business in EEA countries, whilst being regulated by UK authorities.[2] Depending on the exit arrangement after a Brexit, these rights may no longer exist, and financial organisations wanting to continue to provide services across the EEA may have to undergo the costly process of establishing a subsidiary within an EEA country.

Yet, not all financial organisations back the UK’s EU membership. Because EU regulations can be burdensome, especially for small businesses, some financial organisations back Brexit. These include some asset management firms, private equity firms, small insurance firms and hedge funds, such as Toscafund.

Will they relocate?

The potential loss of ‘passporting’ rights and the burdensome nature of EU regulation are some reasons for the vocal response to the EU referendum within the financial services sector. It’s clear that many financial organisations back Brexit, however the banking and large insurance industries are overwhelmingly in favour of Britain’s EU membership. In the case of a Brexit, how much of their operations they move abroad will depend heavily on the health of the eurozone, UK regulation and what’s negotiated between the UK and EU post-Brexit (maintaining ‘passporting’ rights will be important). We look at this issue in more detail here.

Whether the UK can negotiate similar levels of access to the EEA market is a key question. The UK has a major trade surplus with the EU, and the EU has a history of only offering firms in non-EU countries, including Switzerland, limited cross-border access to the EU market based on strict conditions. According to Open Europe, the probability of similar EU access after Brexit is low.

If similar levels of access can’t be maintained and passporting rights are lost, it’s likely that financial institutions, especially banks and large insurance firms, would transport some of their operations to an EEA country. Operations most likely to be transferred include some parts of investment banking, foreign currency trading, insurance, and cross-border sales of securities. The scale of relocation depends on what is negotiated after Brexit.

However, London’s pre-eminent position as a global financial centre pre-dates the single market, and its competitive advantage is based on more than just single market access. Britain’s legal system, a skilled workforce, the English language, a convenient time zone, and a large amount of support services in accounting and law make London an extremely attractive destination for financial organisations. As a result, it’s highly likely that financial organisations would choose to keep part of their operations within the UK.

Car manufacturing

The Society of Motor Manufacturers and Traders, which is a trade association that represents parts of the UK motor industry, conducted a survey which showed that 77% of members believed a ‘remain’ outcome was best for their business. Many large car manufacturers within the UK, such as Nissan, Toyota and Honda, are in favour of Britain’s EU membership. But this doesn’t mean that car manufacturers will leave the UK after Brexit. Vauxhall and Toyota have pledged to continue to produce cars in the UK even if it leaves the EU.

Car makers argue that they rely heavily on access to the single market. It allows cars produced in the UK to be traded across the single market without tariffs. According to Open Europe, loss of access to the single market could mean that car exports would face EU tariffs of 10%, thereby making it less profitable for car makers to produce cars in the UK. Also, the harmonisation of regulations and standards at an EU level removes the complexity and cost to conform with varying national standards.

Conclusion: Whilst it’s unlikely that car makers would shut down their plants immediately after Brexit, incoming EU tariffs could disincentivize car manufacturers from future investment in the UK. Instead, they could choose to invest in EU countries that have unrestricted access to the single market. This decline in future investment could lead to lower levels of production and job losses. Like financial services, the potential decline in future investment will depend on what’s negotiated between the UK and EU after Brexit.

If Brexit did occur, then the car industry seems to be on safer ground than the financial services sector. The UK has a large trade deficit with the EU, a huge portion of which is with Germany. EU firms would also want to minimise disruption to their supply chains. As a result, the probability of similar EU access after Brexit is high. If similar levels of access to the single market can be negotiated, it’s unlikely that many car manufacturers would leave the UK or even cut off future investment.

Small & medium-sized enterprises (SMEs)

When compared with financial services and car manufacturing, SMEs show much less consensus over British membership, principally because of their diversity. Zurich’s SME Risk Index showed that 49% of British SMEs surveyed would vote to remain in the EU and 39% would vote to leave. According to a survey conducted by the Federation of Small Businesses (FSB), 42% of small businesses are unsure of how to vote in the upcoming referendum.

The EU can influence SMEs in many different ways, especially via trade policy, immigration policy, and social and employment regulations. Some SMEs, especially exporters who trade heavily with EU countries, are in favour of EU membership because of the access it gives to the single market. It allows them to trade goods tariff-free whilst applying a common tariff on goods entering from outside the EU, making them more competitive. Some other SMEs benefit from the common regulatory principles across the single market. For example, pharmaceutical companies often benefit from regulatory harmonisation. Yet many other firms, such as non-exporters or those that export to countries outside the EU, are in favour of Brexit because of excessive EU regulation, which makes running a firm more expensive.

Conclusion: SMEs make up 99.9% of all private sector businesses. Their possible relocation will depend on how dependent the SME is on the EU and what’s negotiated between the UK and EU post-Brexit. The uncertainty hanging over these potential renegotiations makes it difficult to foresee which SMEs could leave.

Whilst it’s difficult to predict how SMEs will react to Brexit, those that export to the EU are clearly at risk, and make up 9% of all SMEs. For goods exporters, the worst case scenario is that the UK and EU fail to negotiate a free trade deal and become bound by the World Trade Organization’s most favoured nation tariffs. According to Capital Economics, the UK’s average effective tariff would be 4.4%. At these low tariff levels, it’s unlikely that many SMEs that export goods to the EU would leave the UK, although some may be hit with a higher tariff rate depending on the good being exported.

It’s difficult to predict what will happen to SMEs that don’t export or export to the rest of the world. Access to the single market is not an issue for them. However, according to some, the possible economic shock after Brexit may hurt some SMEs, especially since they are more vulnerable to market dips than bigger businesses. On the other hand, the unleashing from burdensome EU regulation, which also hurts SMEs more than their larger counterparts, could benefit them disproportionately if there is a net reduction in UK regulation. How many SMEs relocate, if any, will depend as ever on the type of Brexit. Some of the biggest influences on this decision will be the economic environment, the cost of relocating, and how many burdensome EU regulations the UK government will abolish.

So will Businesses Leave?

There are so many variables involved that is almost impossible to conclude what precisely will happen to business post-Brexit. What is clear, though, is that business should not be treated as a bloc, but a diverse and dynamic sector that will react accordingly.

A business’s decision to leave the UK after Brexit will ultimately depend on how it affects them financially. Since, some UK businesses rely on the EU whilst others don’t, for example via single market access, the financial ramifications vary greatly and can be felt differently even within the same sectors. For example, many banks favour EU membership whereas many small asset management firms desire Brexit. As a result, there is no consensus among businesses over Brexit.

A business’s decision to leave will also be influenced by how attractive the UK becomes as a business destination after Brexit. Key influences on this will be the economic climate, the UK’s regulatory strategy and what’s negotiated between the UK and EU (especially with regards to single market access).

  •  Christian Stensrud – EU Research Fellow


[1] C. Hope, ‘Official pro-European Union campaign is part-funded by Goldman Sachs, CitiGroup and Morgan Stanley and France’s Airbus and Eurostar, Electoral Commission figures show’, Daily Telegraph, 11 May 2016, Available from:

[2] The EEA includes EU countries and also Iceland, Liechtenstein and Norway.


Photo: BMW Mini plant in Oxford, England. Department for Business, Innovation and Skills.