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Almost 45% of US food and drink firms with a base in the UK are considering moving elsewhere in the EU as a result of Brexit, according to a report by international law firm Gowling WLG.
And more than 60% are more likely to bypass the UK to do business with the rest of the EU in the aftermath of the June referendum.
The report, which looks at the impact of the vote to leave on transatlantic trade, shows how the uncertainties surrounding Brexit, in particular the delay caused by issues such as Article 50, are threatening trading links between the UK and the US.
Additionally, US food and beverage businesses are split in how they currently view trade and investment within the UK, with as many saying the current uncertainty over the future regulatory environment is having a positive effect (38.3%) as say it is having a negative effect (43.2%).
David Lowe, head of the food and beverage sector at Gowling WLG, said: “Nowhere are concerns over the potential impact of Brexit on transatlantic business relations being more keenly felt than among US food and drink businesses.
“Indeed, our research shows that when it comes to the decisions companies are making about trade and investment with the UK right now, it’s having by far the greatest negative impact in this sector.
“Given the huge uncertainties surrounding what type of Brexit the UK will pursue and the associated timescales, it is entirely understandable that US businesses weighing up the pros and cons of future business links with UK are increasingly wary.”
However, the reports added that Donald Trump might prove a source of unlikely hope for the UK as more than 85% of US companies in the food and beverage sector favouring a direct trade arrangement with the UK, mirroring the President-elect’s preference for direct deals between countries.
“The strong UK-US trade relationship that has been carefully nurtured over the past 50 years is in serious jeopardy,” said Bernardine Adkins, head of EU, trade and competition at Gowling WLG’s Brexit unit.
“This is despite a wide consensus amongst US firms that the unique dynamics of the UK market and its access to the rest of the EU drive their preference for doing business here. Concerns that Brexit will have an effect on current investment decisions mean this needs addressing now, not later.
“Without its own privileged relationship with the EU, there is a higher chance that US investment will continue to see the UK as an attractive gateway to the EU’s single market if the UK can retain important elements of its current access.”
The wider ‘Brexit deal or no deal: The implications of Brexit on transatlantic trade’ found more than one third (39.4%) of US businesses with a base in the UK said they are considering moving it to elsewhere in the EU – and over half (53.7%) that export to the EU claimed they are more likely to bypass the UK to do business with the rest of the EU.
Gowling WLG asked 533 companies based in the US which export to Europe for the report, with 68 in aerospace, 71 in automotive, 74 in financial services, 81 in food and beverage, 76 in health products, 75 in life sciences and 88 in tech.
Morning update
Another quiet morning in the City for food and drink with no news flow to report.
Tesco has gained back 1% of yesterday’s losses (see below) first thing this morning, rising to 206.7p. Morrisons is also up 0.5% to 227.6p and Sainsbury’s moves another 1.5% higher to 249.4p. B&M also made a good start, rising 2.8% to 268.2p, as did SSP Group (SSPG), up 0.9% to 383p.
Fallers so far include, Tate & Lyle (TATE), down 2.3% to 668p, PZ Cussons (PZC), down 1.5% to 308.3p and Reckitt Benckiser, down 1% to 6,632p.
The FTSE 100 has slipped off yesterday’s high to open down 0.3% at 6,952.19 points.
Yesterday in the City
Tesco (TSCO) was one of the five worst-performing blue-chip stocks on the FTSE 100 yesterday after the latest Kantar and Nielsen market data. The supermarket fell 3.8% to 204.9p as Nielsen revealed UK supermarkets sales fell for the first time in five months in the four weeks to 3 December and Kantar Worldpanel reported that Britain’s grocery industry is edging closer to a return to inflation after more than two years of falling prices.
Listed peers Sainsbury’s (SBRY) and Morrisons (MRW) had a better time of it, climbing 1.6% to 245.8p and 0.6% to 226.4p respectively.
Most grocery and fmcg stocks made gains yesterday but Coca-Cola HBC (CCH) and AG Barr (BAG) were among the few fallers, down 1.5% to 1,637p and 0.6% to 489.3p.
The biggest riser of the day was Greencore (GNC), shooting up 4.7% to 245p on the back of a broker note rerating the stock as ‘buy’. B&M European Value Retail (BME) also had a good day, up 3% to 260.8p.
Notes from investment bank Jefferies helped push up Unilever (ULVR) 2.6% to 3,193.5p, with the firm arguing the market reaction to aggressive new guidance as “too churlish”. Jefferies trimmed its forecast of Reckitt Benckiser (RB) with expectations of a weak Q4, but the household goods giant still rose 2.8% to 6,697p.
The FTSE 100 climbed 78 points (1.1%) to 6,968.57 points – its highest closing level since October, as television and telecom stocks jumped.
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