As Brexit angst seems to have eased, U.S. companies can define their European business strategy.
For decades, the City of London lived by the maxim that, “when America sneezes, Europe catches a cold.” Analysts on the other side of the pond have always pored over information on U.S. capital flows – both public and private — to understand how they would impact local economic activity and sentiment. For UK institutions, data points from New York to L.A. were required reading in order to develop business strategy and communicate clearly with key domestic audiences.
Unfortunately, U.S. companies rarely examined the UK with the same level of interest and practically never worried about how the economic dynamic might work in reverse.
Then came Brexit.
As policy makers and CEOs return this week from a summer holiday, they find that early Brexit angst seems to have eased. Still, economists and commentators agree that we cannot possibly forecast with any certainty how an eventual separation from the EU will unfold or how markets will react. That climate of prolonged, guaranteed uncertainty around the UK and the EU has presented US companies with UK and European operations, or aspirations, with a major communications challenge.
But it also represents a truly unique opportunity.
Companies that take part in the discussion on Brexit can demonstrate their commitment to a European growth strategy. For some, communicating about Brexit is not an option. When reporting second quarter earnings this summer, U.S. listed companies discussed the Brexit vote “at least 20 times,” according to Reuters, “double the amount the previous week.” And that certainly won’t be the last time the topic comes up.
Away from shareholder disclosure, however, companies that take the opportunity to be transparent and strike a genuinely optimistic tone in their public communications can enhance the stature of their brands. Messages that support the interests of local regulators, trading partners, and elected officials should generally be gratefully received. Most importantly, companies’ need to convey these hopeful, confident messages when building rapport with local employees, particularly given that job losses seem likely in the short term.
So how best for CEOs and other senior executives to participate in the current discussion on the impact of this past summer’s Brexit vote? Here are some tips…
Be careful with the facts:
Some companies contributed helpful market information and data around Brexit immediately after the vote. Others reinforced the negative sentiment, however, by calling attention to their large European workforce. These companies may have had a strategic interest in ringing an alarm bell, but most businesses can’t afford to antagonize their host regulators and governments.
Let the dust settle:
Today, conditions look much less dire than many forecasts did back in June. The US equity market is up 10% and the value of Sterling has not declined as much as expected. In addition, surveys of the services sector of the economy show that part of the economy is expanding.
What’s the takeaway? If this were June, CEOs should wait before making public pronouncement. Unfortunately, back in June some companies, and politicians, of course, jumped into the public debate with hasty warnings and gloomy predictions. Today they look a little hasty for passing immediate judgement. Indeed, recent press coverage has called out a number of companies for statements that amount to a U-turn on Brexit warnings. Timing is important and waiting too long can mean wasting an opportunity, but a considered opinion, backed up by reliable data, always carries greater weight.
Focus on a positive outcome:
Nobody can forecast the future; but company leaders can share their aspirations for a positive future and offer suggestions for potential solutions. David Glaser, CEO of insurance broker Marsh & McLennan did a good job recently. He drew a straight line between the financial communities of New York and London. He highlighted their common bond and even coined a term for the two cities as a single market – “NYLon.” It was a clever editorial device for expressing the sustainability of a well-established trans-Atlantic relationship.
Control bad news:
Some companies won’t be able to avoid the negative impact of market uncertainty. Many may have cut back on UK and European investment, shedding jobs and selling assets into a declining market. Companies active in the UK property business are a case in point. UK investment funds holding commercial real estate assets were among the companies hit hardest by the referendum. When fund values began to fall, investors rushed to redeem shares.
Standard Life was among approximately 10 managers of open-end funds that chose to suspend redemptions, rather than sell assets at significant losses. The company delivered the bad news to investors, explaining why the decision was in best interests of investors over the long-term. But the strategy also called for engaging with the media and, perhaps as a result, subsequent coverage noted positive news from the company: overall assets under management were up, Chairman, Sir Gerry Grimstone, was reportedly working personally on a UK financial community response to the referendum result, and management had initiated a post-Brexit business strategy to be led by a new senior manager.
Every key audience – from your US-based stakeholders, to business, political, and public constituencies in London to Brussels — wants to know how the vote may impact foreign direct investment. Companies committed to the European market implicitly endorse an optimistic vision of the future. That’s a distinctive position, particularly as the panic of last June dissipates, and a more sanguine outlook has begun to emerge.