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Brexit vote complicates planning for local firms

Local businesses with overseas operations are grappling with the June 23 decision of British voters to exit the European Union, and the result has greatly complicated long-range planning.

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Local businesses with overseas operations are grappling with the June 23 decision of British voters to exit the European Union, and the result has greatly complicated long-range planning.

Law firms with a London presence predicted shortly after the vote that uncertainty, possibly for years, would follow. But the full range of strategic issues raised by the British vote is only now coming into focus.

"Overall, from a business standpoint it makes both short- and long-term planning very difficult," said Kathy J. Wyrofsky, president of International Products Corp., a maker of specialty cleaners and assembly lubricants based in Burlington, N.J.

The company has a facility in south London and has used the U.K. as a platform for selling into the European Union. But the Brexit vote has put that strategy in doubt.

The question for businesses like Wyrofsky's is whether the favorable trading terms enjoyed by EU-based companies will disappear. Meantime, the company must navigate rules coming out of Brussels that could change once again as the British leave.

One particularly costly regulatory scheme requires that the company designate a U.K.-based agent to register various chemicals it uses. Wyrofsky says she has no idea if, after Brexit, they will need to find an agent on the continent.

"All of these things are coming out of Strasbourg and Brussels and it is very difficult to know whether they will apply to us or not," she said.

The company makes ample use of container shipping, hence its south London location. But Wyrofsky and other executives at International Products are searching for alternative sites, should the U.K. location lose its advantages.

As a consequence, Wyrofsky is planning to scout locations for a facility in the Netherlands. Some of these changes may have been made even without a Brexit vote, Wyrofsky said, noting that more manufacturing now is done in eastern Europe.

"Brexit is pushing us to move a little faster," she said.

Jonathan Turner, chairman of Langhorne-based TurnaSure LLC is facing his own set of uncertainties. Turner's company makes specialty devices that measure whether bolts used in the construction of bridges, buildings, highway traffic signs, and other structures have been tightened enough. The company made more than 1.5 million of these washer-like "direct tension indicators" for the construction of the Huey P. Long Bridge in Louisiana, and sells to companies in the U.K. and Europe for projects there. What Turner doesn't know, but would love to find out, is whether the Brexit vote will halt business and residential investment coming into the U.K., dampening a construction market that has benefited TurnaSure. If so, the company would begin looking at other markets, such as South America, in addition to selling in the EU, Turner said.

"I am not alone in our industry," said the British-born Turner, who lives in Society Hill. "Anyone exporting to companies in the U.K. who are enjoying the big market in the EU, all are going to have the same worries. I do think this is going to have an effect on companies who have set up factories in the U.K. in order to avail themselves of 500 million customers [in Europe]."

This sense of uncertainty was on full display at the law firm Morgan, Lewis & Bockius LLP on Thursday, where the British deputy consul general in New York, Ross Allen, appeared on a panel of experts to talk about the Brexit fallout.

Allen said there was zero likelihood that the British government would reverse course and somehow arrange to remain in the European Union. That said, he expects that London will remain a major financial center. The U.K. has an extraordinarily dynamic economy, he said, adding that the city of Birmingham alone produced more jobs last year than were created in all of France.

Yet one of London's biggest draws is its capacity to attract top talent from around the globe, and that is now in question given that pro-Brexit voters expect tighter immigration restrictions. Panelist John Stadtler, a partner at PricewaterhouseCoopers LLP, pointed out that global companies expect a deep talent pool in London and now are growing concerned that such changes will harm recruiting.