Tuesday, August 2, 2016

U.S. Companies Feel Impact of Brexit

Five weeks ago, a U.K. referendum resulted in the forthcoming exit of the country from the European Union. The timetable isn't yet known, but the country is preparing plans for an orderly exit and the simultaneous negotiation of new trade pacts with European trading partners.

Across the pond, U.S. companies are feeling the impact of Brexit. First, the currency issue is changing profit and cost projections--because of the see-saw value of the pound sterling versus the U.S. dollar. When the value of the pound drops, the dollar is stronger, a concern for U.S. companies (like Carnival cruise lines) doing business in U.K. markets. Currency fluctuations change the cost of supplies purchased by U.S. firms from U.K. sources--uncertainty that affects not just the bottom line but the marketing plans for the remainder of 2016.

Multinational banks based in the U.S. are watching to see whether London will remain a financial center and gateway to Europe. All have contingency plans for dealing with the challenges if they decide to relocate for better access to European customers (commercial customers as well as consumers). Some mergers and acquisitions between U.K. firms and others outside the country are being postponed or taken off the table due to the uncertainties and the financial repercussions of Brexit. Airlines are reevaluating routes to and from (and within) U.K. destinations.

A lot of U.S. companies buy and sell in the U.K., and Brexit appears to be dampening the economic climate in Great Britain and beyond as firms try to determine a way forward during this transition period. Consumer confidence is down in the U.K. and the result is likely to be slower spending, which will hurt marketers that target consumers.

How will U.K. and international holiday spending be affected? What about "affordable luxuries" that tend to do well despite economic ups and downs? And global travel?

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