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Why Charlotte firms are watching how Brits are voting Thursday

A man wearing a "Vote Remain" t-shirt walks in the rain in central London on June 23, 2016, as Britain holds a referendum to vote on whether to remain in, or to leave the European Union (EU). Millions of Britons began voting Thursday in a bitterly-fought, knife-edge referendum that could tear up the island nation's EU membership and spark the greatest emergency of the bloc's 60-year history.
A man wearing a "Vote Remain" t-shirt walks in the rain in central London on June 23, 2016, as Britain holds a referendum to vote on whether to remain in, or to leave the European Union (EU). Millions of Britons began voting Thursday in a bitterly-fought, knife-edge referendum that could tear up the island nation's EU membership and spark the greatest emergency of the bloc's 60-year history. AFP/Getty Images

British citizens are voting Thursday on whether or not to stay in the European Union. Many economists warn that should voters decide to leave the 28-nation bloc, it could rattle Britain’s economy and also send ripples throughout the rest of the E.U. and the U.S., too.

It’s unclear how much businesses as far away as Charlotte will feel the impact of a “Brexit,” as it’s being called. But there are 118 U.K.-based firms with a presence in the Charlotte region, accounting for 163 locations and 6,585 employees, according to data from the Charlotte Chamber.

American firms that trade with the U.K. and the rest of Europe are watching the vote especially closely. According to the U.S. Census Bureau, the U.K. is North Carolina’s seventh-largest export partner, accounting for 3.4 percent of all exports.

Here’s what to know about the controversial referendum:

Background

Those in favor of British exit from the E.U. cite a dissatisfaction with the E.U.’s handling of terrorism, refugees, trade, employment and the Greek financial crisis.

Britain’s economy is growing twice as fast as the rest of the E.U.’s – further fueling pro-Brexiters’ argument that the E.U. is holding back Britain’s economy. But the E.U. is also Britain’s biggest export market, so a Brexit “yes” vote would mean Britain would have to figure out new trade agreements, which could take years.

At this point, polls are showing that a Brexit vote is too close to call.

Last week, the pro-EU Labour Party lawmaker Jo Cox was murdered, and Brexit campaigning was suspended as a sign of respect. Cox was vocal in her support of the U.K. remaining part of the E.U.

Cheaper vacations for Americans

Experts say if the Brexit passes, the British pound could be hit hard, resulting in a domino effect on global economies. For travelers visiting the U.K., that would likely mean a preferential exchange rate, and cheaper vacations, Bloomberg reported.

There could be other travel-related perks of a Brexit for Americans. Reduced spending power in the U.K. means residents there could be wary to take vacation elsewhere in Europe, resulting in cheaper vacations across the entire Mediterranean, especially in “British-favored destinations” like Ibiza, Mallorca, Tuscany, and Provence, Bloomberg said.

Additionally, travelers to the U.K. trying to use their phones won’t be able to rely on a universal European SIM card if the Brexit passes, since the U.K. would have to switch over to an independent mobile network.

Financial markets

The possibility of a Brexit carries with it uncertainty that trickles into global financial markets, experts say, causing investors to gravitate more toward less risky assets like bonds. And since mortgage rates move up or down with the yield on Treasury bonds, mortgage rates could remain lower for longer.

Federal Reserve Chair Janet Yellen said this week that a Brexit “yes” vote could have “significant economic repercussions.” A shakier global economy would give the U.S. central bank further pause when it considers at its July meeting whether or not to raise short-term interest rates, the cost for banks to borrow money.

Low interest rates have hurt the profitability at banks, forcing Bank of America and other institutions to cut expenses in recent years.

According to analysts at Keefe, Bruyette & Woods, JPMorgan Chase and Goldman Sachs Group are likely to be hardest hit among America’s biggest banks by a vote to leave the E.U.

The two U.S.-based lenders are “most exposed to the potential negative fallout” from a so-called Brexit because they generate a large amount of their income from the United Kingdom compared with peers, the analysts wrote. JPMorgan’s and Goldman Sachs’s U.K.-based units generated a total of $14 billion in operating income in 2014, exceeding that of their three main U.S. rivals combined, according to the note.

Charlotte-based Bank of America generated the third-most amount of revenue from the U.K. ($5.2 billion), according to the report.

“We’d expect the banks to experience both revenue and expense headwinds” during a two-year transition period, the analysts said in the note. The analysts wrote that longer term, the impact for the banks would “be a wash.”

The Associated Press and Bloomberg News contributed.

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