Italy's man in Philly defies UK vote: "Europe is our home" (UPDATE)
Will U.S. firms leave London for mainland Europe?
Canepari also cited remarks by Italy's Foreign Minister, Paolo Gentiloni: "This vote is a turning point for Europe. It's an opportunity to launch common policy for growth, defense and immigration. Italy believes in that."
The dollar is up, gold is up, U.S. Treasuries are in demand, and the Federal Reserve has probably postponed rate cuts til at least this fall, Mayer added. --France and other countries may vote to leave the EU next. -- But Britain is just 3% of the world economy, and its problems shouldn't hurt the U.S. much. Mayer sees the basic problem: aging world population = slow growth.
Britain's expected exit from the European Union, after yesterday's non-binding popular vote, could mean extra hassle for multinational U.S. exporters and investors -- and extra opportunity for lawyers, accountants and other consultants -- if British financing and regulatory rules start diverting from standard European regulations.
A British separation could cause American banks and corporations to shift their export, trade and overseas financial operations toward mainland Europe.
But it's not likely to much affect direct U.S.-British trade, the local British American Business Council rushed to reassure its Philadelphia-area members this morning.
The prospect of the U.K. distancing itself from Europe -- and global finance exiting London for Frankfurt or other European cities -- drove British stock and currency prices down, and provoked the resignation of pro-EU Prime Minister David Cameron.
But "the strength of the U.K.-U.S. economic relationship over the long term and the many aspects of the U.K.'s attractiveness for foreign investors all have proven that the U.K. can provide a business-friendly environment," the Council said in a statement. No matter what's next, "the trans-Atlantic economy will continue to be a source of opportunity."
The plunging markets "are reacting to uncertainty" and the change in political leadership -- Conservative Cameron's rival leaders in the Labour party also backed the E.U. and now they are also expected to resign after voters' rejection -- as well as the possibility Scotland and Northern Ireland might choose Europe over England, weakening the U.K., Silverstone told me.
"That's a lot of short-term turmoil for a small island," Silverstone concluded. But he expects the U.K. will remain America's main "gateway" to larger European markets.
A team of Dechert LLP lawyers including partner Miriam Gonzalez sent clients a sweeping summary of what Brexit could mean for business. Highlights:
- The U.K. has two years to negotiate what separation from the E.U. means for contracts, immigration, trade, data-protection and employment law. Could take longer.
- "Most business will be affected to some degree."
- London, "the preeminent financial center in the E.U." and the engine of the modern English economy, may be "freed from the single European rulebook" and regulators. But the British helped write the rules in the first place. It will likely become more complicated for London-based firms, including U.S.-owned firms, to do business in Europe.
- "The E.U. has been an investor in research and development [and a leader in regulation for] pharmaceuticals, telecommunications and energy" and medical-life sciences. That investment and standard European rules, for England-based companies, is now uncertain.
- EU trade agreements might no longer apply to the U.K. While the British pound has collapsed to 1985 values -- which means British exports are now a lot cheaper for foreign markets -- the EU and other countries may start slapping tariffs and trade barrier against British goods.
- Trademark protections, the move toward single European patents and standardized trademark taxes may have to be renegotiated for Britain.
- Competition laws, import/export duties and data-protection regulations may also diverge for the U.K., adding to the cost of doing business there compared to Europe, the U.S. and other large markets. "The potential of tariffs on imports and exports, or the increased administrative costs of a customs regime," will likely affect many businesses.
- Britain may choose to water down European-style job protections, depending on "the political appetite" in Britain for trying to develop the country as an employer-friendly alternative to Europe. It could also become more complicated for expatriate workers, who currently number 3 million in the U.K.
- Escaping EU transport, agricultural, waste management, energy and other environmental law -- and laws generally -- "may provide greater scope" for the U.K. to develp its own. The nation is still subject to non-EU international agreements, but it may be more flexible in implementing them outside the E.U.
As always, much of the change and many of the disincentives will be around the economic margins: for example, U.S. companies with a small U.K. presence could end up bypassing London for the much larger European market.