DAVOS, Switzerland (Reuters) - Companies are spending millions of dollars to get ready for a British exit from the European Union and, with little idea of what that would look like, are preparing for higher costs and moving their headquarters from Britain.
British business is keen to play down the possibility of a “Brexit” after a planned referendum to ease widespread uncertainty -- mainly over how long it would take and how it would play out.
But with the government giving few hints as to how a possible departure could unfold, companies have begun to direct teams of lawyers and advisers to pore over different scenarios to try to determine where they could hurt the most.
Dominic Barton, global managing director at consulting firm McKinsey & Co, said he knew of one global bank which was spending $75 million “because you’ve got to think about (your) real estate footprint, moving people, tax implications”.
“And even though you don’t think it’s going to happen, as a leader you’ve got to have a backup plan,” he told Reuters at the World Economic Forum in the Swiss resort of Davos.
The chief executive of a large financial institution with business across Europe, who spoke on condition of anonymity, said it could cost $50 million to work out how to shift certain operations from London to cities on the continent.
Companies could consider moving their headquarters due to the uncertainty that would immediately follow an exit vote over Britain’s relationship with its former EU partners and the rest of the world.
The costs, he said, would include deciding how to take on office space, how to staff new outposts and how to best to manage the large expense of relocating executives and their families to different countries.
Prime Minister David Cameron has called on businesses to support him in his negotiation with the EU on winning better membership terms for Britain in the bloc and then to campaign alongside him to keep the country in it.
He received a sympathetic response from hundreds of business leaders meeting in Davos, but they also called on him to do as much as possible to agree a deal in February and then hold the referendum as quickly as possible - in June.
“Timing is critical,” Martin Sorrell, head of the world’s biggest advertising group WPP, told Britain’s finance minister, George Osborne, in Davos.
Others wanted more direction from the government, which has refused to talk about a possible exit before Cameron’s renegotiation ends, to judge where its departments see the main pressure points if Britain votes to leave.
One investment fund head said it was almost impossible to plan for because there were just too many “unknowns”. Several big international banks think Brexit would be bad for Britain, while they could live with it.
Anne Richards, chief investment officer at Aberdeen asset management, said there would be some winners.
“We are checking to make sure that our existing arrangements could cope - and so far we think they could - so we think we are covered,” she said Reuters’ Global Markets Forum.
“We don’t yet have a handle on costs, but I‘m sure the one definite winner out of the referendum, whichever way it goes, will be lawyers and advisory firms we’d all have to hire to make sure we have every base covered.”
additional reporting by Martinne Geller; Editing by Kate Holton and Anna Willard