companies gear up for a long night
BRITISH companies are preparing for the possibility that the country will vote to leave the European Union (EU) with extra funds, prewritten statements and plans for late-night vigils by teams of consultants.
In the final days before the June 23 referendum on EU membership, the prospect of a Leave vote has come into sharp focus, prompting a last minute flurry of preparations in the corridors of ‘UK plc’.
Much of the focus is on communication – how to assure customers, employees and investors that there will be near-term business continuity in the event of a Leave vote. Britain would have two years to negotiate its exit, or Brexit, from the 28-country bloc.
Treasury departments will also be working overtime because a vote for a Brexit would be expected to rile currency markets and have major consequences for trade, the economy and migration in Britain and elsewhere.
Many companies have yet to work out detailed plans, as any post-Brexit picture is unclear and the race still looks too close to call.
But some have sprung into action since the momentum in the polls swung towards the Leave camp in the latter stages of campaigning.
“The nearness of the vote and sudden in- creased likelihood of Brexit has definitely sharpened client appetite for draft statements,” said a senior executive at a public relations firm, one of three who said last week there had been an increase in client requests for communications advice for the days after the referendum.
As of February, more than three-quarters of Britain’s FTSE 250 companies had not made any contingency plans for a possible exit, according to a survey published in April by the Chartered Institute of Internal Auditors. Over 60 per cent said they planned to do so, but the uncertainty at that time made it impossible.
For many export-orientated multinationals in the FTSE 100 index, violent currency swings on the morning of June 24 are the top concern.
“The biggest short-term impact and the biggest headache for us is going to be sterling,” said the head of strategy at one top-10 FTSE company.
While chief executives generally back Remain on the grounds that unfettered access to Europe’s market of about 500 million consumers is good for business, a short-term fall in sterling on a Leave vote would make exports cheaper and could boost sales, while a Remain vote could see the currency jump.
Either way, it spells volatility for sterling-denominated earnings at businesses, including engineering firms Rolls-Royce and BAE Systems, pharmaceuticals giant GlaxoSmithKline, drinks group Diageo and British American Tobacco.
Some companies have also been keeping open lines of credit in case Brexit-related volatility in- creases their need for cash.
Several executives said they were concerned about managing relations with international employees, customers, suppliers and shareholders immediately after the results are announced on June 24. While there were no plans to issue public statements to the stock market, several executives said they would be likely to communicate with stakeholders in the event of a Leave vote.
“I would want to reassure our European partners that this is not something they should regard as a hostile act,” said Miles Young, chairman of advertising agency Ogilvy & Mather.
Another senior FTSE 100 executive said the company would bring in external lawyers and consultants on June 24 for backup, if necessary.
One senior executive at a public relations firm said he planned to stay in a central London hotel the night of June 23 to be close to the office.
He also expected most of the firm’s public affairs team to work late on June 23 and come to work early on June 24 to watch and analyse the results on behalf of multinational clients.
“As their public affairs eyes and ears, they’re expecting us to do…most of the watching and analysis for them,” he said.
In the financial services sector large banks are bracing themselves for the most volatile 24 hours for markets in a quarter of a century.
A FTSE 100 finance director said there would also be concern about what a Brexit would mean for the rest of the EU.
“The EU is worried,” he said. “We are an important part of it and you risk a domino effect. We’re in the hands of the gods.” (Reuters)