Brexit? Oh, Just Keep Calm Already
(This post originally appeared on the Huffington Post)
OMG … Brexit!
Sick of the word yet? Yeah, so am I. Since Britain’s historic vote last week to leave the European Union, it’s been all Brexit on all the media. The pound is in collapse! Britain faces recession! Inflation and unemployment will be higher! British companies will flee! London’s financial center will be no more! Coming up next: locusts, plague, the taking of your first-born. Oh, and Trump. Thank God the Game of Thrones finale provided some diversion (and a new King of the North—hooray!).
You’re an American business owner. And so am I. What we’re both concerned about is how this may affect our livelihoods, right? So let’s talk reality.
The United Kingdom (which comprises England, Scotland, Wales and Northern Ireland) has the fifth largest economy in the world and makes up 4% of the world’s GDP. This is not a small country. For centuries, the UK has been perfectly capable of operating on its own and without the “partnership” of its European neighbors. And long after you and I are as dead as Walder Frey’s sons (and Walder too I might add), England will still be England. And it may be a much better England, what with (as some argue) less tribute being paid to support the welfare states across the Channel. The UK has its own currency, standing apart from the Euro. Its commonwealth is made up of 53 independent and sovereign states—from Canada to Australia—that still “serves” the Queen but also has its own special relationship with the mother country—socially and economically.
The takeaway: if you’re doing business with the UK, the UK is not going away. In fact, as many pro-Brexit advocates believe, the country will only grow stronger with its newfound ability to make more choices on its own and pocket the money it was previously handing over to Brussels. Are you looking to grow your business in the UK? Want to partner with more UK companies? Sell more products to UK customers? Going forward, I’m betting it will be easier with less regulations and bureaucracy. This will be a country that sports a large, powerful economy who will want to do more deals and flex its muscles. Britain will be leaner, meaner and may…and I realize I may be overly naive here—actually stop making fun of Americans. Nah! But, regardless, this is an opportunity for American companies in particular who have always enjoyed the benefits our “special” relationship with our friends across the pond. Jump on it.
What about the turmoil in the currency markets? When I lived in England a mere 30 years ago (God, it’s been that long?), the pound to dollar exchange rate hovered near 1:1. I had to talk my sister, who visited me while I was studying there, into not buying up Cornish game hens at Harrods because they were “so cheap.” She’s a smart person (and now a doctor), but even smart people sometimes need to learn that packing Cornish game hens in a suitcase is not a great idea. The pound may lose its value against the dollar, which means that your British customers may find it too expensive to buy from you. But with this loss in value comes a much cheaper price for you to buy products in the UK with your stronger dollar. Smart business owners, like smart investors, buy low and sell high. But I warn you: what goes down will eventually come back up again. You’ll eventually see the pound to dollar ratio returning to its typical 1.5:1 parity (slightly more or less) in the coming months, so take advantage of the cheaper prices sooner rather than later.
And what about the effect of a potential UK “recession” on your business? Oh please. Sure, if your business relies significantly on the UK market you could be in for slower times if this recession actually happens (and there’s no certainty that it will, just the forecasts of economists that are routinely wrong as often as they are right). And yes, the stock prices of some big American companies in your 401(K) plan may fall a bit if they’re impacted by a UK slowdown. But let’s be real: if you’re like 98% of my small business clients, then 98% of your business comes from local or regional customers so you’re not going to see a blip. Americans are not going to buy less gas, fewer pizzas or cut down their salon appointments just because of some bumpy times in the UK. And if those big American companies lack the variety of customers and markets where a UK drop significantly affects them, then you might want to consider owning shares in other big American companies that are smarter about how they manage their operations and diversify their markets.
So like those popular t-shirts say: keep calm and Brexit. Your small business will be fine.