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US Middle Market poised to "Brexit" on some UK business investments

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US Middle Market poised to "Brexit" on some UK business investments

Businesses eyeing slight shift of resources to domestic business development.

New data from research institute National Center for the Middle Market suggests more than one-quarter of US middle market companies will decrease business investments in the United Kingdom following the results of the "Brexit" referendum. About the same number say they will reduce their purchases from and sales to the U.K. The report, released today, details survey responses from 569 middle market firms, polled one week after the U.K. referendum results were announced on June 24.

Brexit reactions from the middle market are divided overall. Half of all middle market firms predict no significant impact on their business, while the remaining 49% anticipate a somewhat to extremely significant impact on their operations. The subset of middle market firms that have international operations is a bit more bearish; 54% of these firms foresee a moderate to severe impact.

"From the data we're seeing, the Brexit vote doesn't look earth-shaking for the middle market as a whole," said Thomas A. Stewart, NCMM executive director. "At the same time, it's important to note that one-eighth of middle market firms (13%) are predicting an extremely significant impact on their business."

New Regulation May Be a Sore Spot for Trade
The United Kingdom will presumably require its own shipping procedures upon leaving the European Union, and middle market executives express concern about the red tape this could create for them and their trading partners. Worries of regulation changes surrounding imports/exports—as well as varying fees and tariffs—are rising. Some fear this will prove more challenging if more countries follow the U.K.'s lead out of the E.U.

"The uncertain complexities Brexit introduces to international regulation are clearly troubling American exporters and importers," added Stewart. "Some are rethinking investment plans; but as one respondent phrased it, 'This is politics. Trade must go on.'"

Silver Lining for U.S. Economy?
US companies predict some reductions in U.K.-based business investments, purchasing plans, and imports/exports. Twenty-eight percent of firms predict decreases in U.K. business investments, with a similar number (26%) anticipating an increase in US business investments. "It looks like companies are taking money they were planning to invest in Britain and, instead, putting it to work at home," said Stewart. "If so, middle-market company responses to Brexit will hurt the United Kingdom and help the United States."

 

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