DANISH CAPITAL IN 2016: Business consequences of Brexit

Danish businesses with significant interests in the UK woke up to an unpleasant surprise last Friday, with the British electorate surprisingly backing Brexit. What are the consequences of this?

Knock-on effects
A lot of volatility is the immediate answer. Sterling fell sharply upon the news, and this will make Danish goods more expensive.

In the medium term, the uncertainty is likely to lead to a fall in investment, which will have a knock-on effect on jobs and wage increases in the UK. British consumers are therefore likely to have less money to spend, which could affect Danish exporters.

Uncertainty to reign
It is clear the uncertainty will last some time. Article 50 of the EU’s Lisbon Treaty requires two years’ formal notice to be given. However, the British government is in no rush to invoke this. Prime Minister David Cameron has said he will not invoke this himself, so it will fall to his successor (likely to be appointed in the autumn).

And despite various EU countries pushing for a quick resolution, there is no legal recourse to push a member out against its will. So it looks like the uncertainty will continue until the end of 2018 – and even then there is no guarantee that all the issues will have been successfully dealt with.

Life goes on, but …
Of course, business will continue in the interim period – but the ongoing uncertainty will undoubtedly have an impact. In the long run, much will depend upon the eventual deal agreed with the UK.

Leave stated during its campaign that it would like a comprehensive free trade deal. Whether it will get this depends upon what obligations it is willing to accept. The idea, promoted in the campaign, that the UK can have full access to the single market without any corresponding obligations seems hopelessly naïve.

Blow for Denmark
In general we have entered an uncertain time for both the United Kingdom and Europe. The EU will also lose a loud, and often belligerent, voice pushing the liberalisation of markets – which Danish companies appreciate.

The British electorate’s curious decision will not only restrict their own job opportunities but will negatively impact Denmark.