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  4. European companies fear Brexit fallout could test economic resilience

European companies fear Brexit fallout could test economic resilience

18 May 2016
  • European companies fear Brexit fallout could test economic resilience

With just five weeks to go until the UK’s referendum on European Union membership, new research from Grant Thornton’s International Business Report (IBR) reveals that the European business community is fearful of the impact a Brexit would have on the continent’s economy.

Overall sentiment among European businesses remains resilient in the face of various economic pressures, but there is evidence that a major event like a Brexit or a worsening of the migrant crisis could put that resilience to the test. 

Grant Thornton asked business leaders across Europe what impact a British exit from the European Union would have on the continent. Nearly eight in ten (79%) of those surveyed within the eurozone believe a Brexit would have a negative impact; in comparison, less than 4% believe it would be positive.

In the UK itself, the vast majority of firms (68%) believe that Brexit will have a negative impact on Europe. The figures are also high among businesses in countries with long-standing trade relationships with the UK including Ireland (96%) and Germany (89%). 

Francesca Lagerberg, global leader for tax services at Grant Thornton, said:

“The outcome of the UK referendum is unclear and for people to decide. However, while we’ve heard plenty about what firms in the UK think about it, until now we’ve not really had a comprehensive measure of how counterparts on the continent feel about the issue.

What's abundantly clear from our research is that European business leaders overwhelmingly view a Brexit as a negative development for the EU.

“The referendum comes at a critical time for Europe. Confidence levels among its businesses are actually pretty strong when you consider the range of factors threatening to undermine it; low growth, high unemployment, the migrant crisis and a potential Brexit to name a few. However, any one of these flaring up over the next few months could see that optimism wobble if the economic shocks undermine business leaders’ ability to plan and invest.”

Aside from the prospect of the UK leaving the EU, Grant Thornton also asked business leaders to name the other factors which they feel pose the biggest threat to the economic stability of the region. Within the eurozone, businesses highlighted low growth (25%) and high unemployment (19%) as their main concerns. Issues such as deflation (13%) and migration to the EU (10%) were cited less often, despite the latter’s prevalence in the media in recent months.

In the UK, firms were most likely to cite national debt as the biggest challenge to economic stability in the EU, with almost one in three firms stating that this was their top concern (29%).

Despite these concerns however, the IBR also paints a pretty bright picture of European business optimism. Eurozone business economic optimism stood at net 31% in Q1 2016, higher than the global figure for the same period (26%). Eurozone countries also report relatively high employment expectations for the coming 12 months (25%), a metric which has remained stable over the past year. 

Francesca Lagerberg added:

“Thus far business leaders across Europe don’t appear to have let the whirlwind of threats to economic stability affect their outlook and optimism too dramatically. However, as we look ahead to the coming months, what’s clear is that there is the potential for those pressures to grow. In light of this, reviewing current operations and taking steps to build resilience could ensure that sentiment remains robust over the coming months.”

Notes to editors

The Grant Thornton International Business Report (IBR), launched in 1992 initially in nine European countries, now provides insight into the views and expectations of more than 10,000 businesses per year across 36 economies.  More information: www.grantthornton.global

Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis, primarily by telephone. IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with more than 2,500 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors conducted in January and February 2016.

 

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