Worst Impacts of Brexit Still to Come for UK Economy, Business Leaders Say

Ellen Milligan
·3 min read
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(Bloomberg) -- The UK economy is yet to feel the worst impacts of Britain’s divorce from the European Union, senior business leaders said, in spite of Prime Minister Rishi Sunak’s recent efforts to smooth relations with the bloc.

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“The messier part is yet to come,” in terms of the impact on financial services, Citibank Europe Plc Chief Executive Officer Kristine Braden said on Wednesday in a panel discussion at the Bloomberg New Economy Gateway Europe conference.

Braden’s view was backed up by APCO Worldwide LLC adviser Declan Kelleher, who said cross-border trade frictions are likely to increase as the UK begins to implement new rules. Meanwhile Ryanair’s CEO Michael O’Leary said the divorce will continue to have a “net negative” impact on the UK economy over the short to medium term.

The views from business highlight how Brexit continues to weigh on a range of companies some 7 years after Britons narrowly voted to leave the EU. The Office for Budget Responsibility, the government’s fiscal watchdog, estimates Brexit will knock 4% off projected economic output in the long run, relative to if the UK had stayed in the EU.

‘Huge Challenges’

Braden said her bank — a unit of Citigroup Inc. — has had to redirect clients to its offices in the EU as a result of Brexit. It’s in the process of moving employees and is now entering a third phase, moving some of its products from the UK to other European countries.

Citi’s Braden Predicts More Brexit Moves to Satisfy EU Watchdogs

For his part, O’Leary said the impact on Ryanair has been “considerably messier than it should have been” and warned a more sensible trading agreement between the UK and EU is needed to mitigate the repercussions.

Ryanair has faced “huge challenges” in the UK, in large part because the country’s “labor market is broken,” he said. It’s “incredibly hard” to hire people in the UK and getting visas for European workers is now very expensive, adding to costs, he said.

Meanwhile, Kelleher, a senior advisor at APCO, warned the trading friction caused by Brexit will increase over time because the UK hasn’t yet fully implemented regulatory changes and border checks.

Raising Barriers

“Those barriers are still there and they’re actually going to increase,” Kelleher, who previously worked as Ireland’s Permanent Representative to the EU in Brussels, said. Once controls are fully enforced, the impact on businesses will “become even more difficult,” he said.

Still, there have been some improvements. Sunak earlier this year struck a fresh deal with the EU on trading arrangements for Northern Ireland, removing a major point of tension with the bloc. Both O’Leary and Braden said that represented progress.

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And for O’Leary, Britain’s demographics also point to the possibility for relations with the EU to improve further, because of the older age profile of those who voted for Brexit.

“In the next five to 10 years, quite a number of the Brexiteers will die,” he said. A huge majority of the younger people in the UK coming through are much more pro-European.”

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