2.2.2Impacts on doing business of US firms in LondonAsmentioned above, the United States of America is the largest trade partner withthe United Kingdom; therefore, this is the reason why Brexit has made up hugeimpacts on not only the UK’s economy but also American economy, especiallydoing business of US companies and enterprises based in London. Accordingto the report “Economic Implications of a United Kingdom Exit from the EuropeanUnion” published in July 2016, James K. Jackson and Shayerah Ilias Akhtarclaimed that the UK was also the second largest partner of the US in terms offoreign direct investment (FDI) and goods trading as well. A good example thatthese two specialists in International Trade and Finance pointed out is therewere approximately $600 billion FDI in the UK in 2015 came from the US,including two main aspects: finance and insurance and holding companies.Moreover, 22% of total US corporate assets abroad were collected from Britishmarket.
From these figures, the role of UK in development and expansion of USbusinesses is undeniable and this illustrates why large-scale companies andenterprises of American attempt to have their headquarters or offices belocated in the City of London which consists of a wide range of advantages likehuman capital resources, infrastructure, and rules of law for business, .etc.The result of referendum in GreatBritain has had significant influences on the operation and activities of USfirms. First of all, they have to face up with difficulties in expanding theirmarkets because the strategic goal of US companies to do business and tradewith the United Kingdom is to access to another one which is known as thesingle market of European Union – the largest, wealthiest and most importantforeign market in the world to them, according to a report commissioned byAmerican Chamber of Commerce to the EU in March 2017. Furthermore, Brexit couldpotentially reduce revenue of these enterprises and put at risk £500bn that USfirms invested in London (James K. Jackson and Shayerah Akhtar, 2016). Anotherimpact is related to some changes in strategy of these firms in order to adaptto the situation.
Two possibly main changes are restructuring their companiesand relocating their headquarters outside London. According to the research”Brexit: 40% of US firms with British offices are considering relocating to theEU” in December 2016, Zlata Rodionova pointedout that US firms had been trying their bests to find a way that helps them dobusiness directly with the EU without the appearance of the UK. Indeed, somecompanies working in specialized fields like food and beverage, life sciencesand financial services were most likely to consider relocating. An interestingpoint is that Paris is among a number of European cities seeking to these firmsassessing a move away from London to maintain their access to EU markets, andfaces competition from Dublin, Frankfurt and Luxembourg, amongothers. Besides these impacts analyzed above, it is crucial toexamine reactions of US enterprises based in London towards the decision toleave. On the opposing side, a significant case is Caterpillar.
It is a giantcompany focuses on manufacturing heavy-equipment, its production lines andfacility are located in Great Britain, and this has created 9,000 jobs for bothAmerican and British people. According to the leaders of this company includingthe chairman and the executive officer, demonstrated the dilemma that Americanbusinesses in Britain have to face up with and also potential effects of thereferendum, they claimed that it would be better for the UK to stay in thesingle market. In addition, other large-scale U.S.
businesses made muchmore efforts to show their viewpoints. For example, a division of Ford in theUnited Kingdom sent a letter to its 14,000 employees so as to emphasizethe importance of maintaining stability and to prevent disruptions in trade.Wall Street’s biggest banks like Goldman Sachs, J.
P. Morgan and Morgan Stanley,drew up a report to prove hundreds of thousands of dollars donation toBritain Stronger in Europe – the leading campaign to remain. A survey byBritish American Business found that 70 percent of its members thought aBrexit would damage their operations or future investments.Incontrast, from the perspectives of US companies that supported Brexit, the EUregulations have constrained the innovation and competitiveness in City ofLondon, this also a little bit influences on their businesses. Their reactionto Brexit was represented by a letter supporting an exit with the signing of250 business leaders.