The referendum held on 23 June 2016 to decide whether or not the United Kingdom should stay in the European Union caused quite a ruckus when the results came back. The result, 52% for leave against 48% for remain, has caused a changeover in power as David Cameron announced his resignation with Theresa May rising up to take his place. Brexit is also set to impact British and non-British businesses in several ways due to its effects. Although the majority believe Brexit will have a negative impact on business (for a detailed analysis you can refer to Global Counsel’s report, Brexit: the impact on the UK and the EU here), there are some companies which may benefit from the decision in relation to their corporate contracts. Let’s have a look at four different companies may be experience positive results due to Brexit in relation to commercial contracts.
- Boeing, the American aerospace company, will be affected by the change in value of the British pound. Prior to Brexit, the UK government was set to enter into deals with Boeing for the purchase of several aircraft including maritime patrol aircraft and helicopters for the British army. In total these contracts were worth about $6 billion. However, the fact that the British pound has dropped due to Brexit momentarily made this deal uncertain. However, only a few days after the referendum Boeing announced a new partnership. This not only involved a contract to buy patrol aircraft and helicopters but also involved a boost in spending to create more jobs in Britain. In addition to this new agreement Boeing in the last 5 years has doubled its UK workforce and spending in the UK supply chain. The lower cost of the British pound due to Brexit will mean that their operation costs in this location will be lowered. So it seems Brexit, as opposed to the presumed trend, has had a positive impact for Boeing.
- Rentokil - British business services group Rentokil, known also as “The Experts in Pest control” are also set to gain from Brexit. With the pound shedding more than 10% of its value against the US dollar since the UK’s referendum, this company seems to be becoming more appealing to prospective customers abroad. The Financial Times reports Rentokil earns nearly 90% of its revenue from outside the UK, with an expected revenue growth set at £245 million for the remainder of this year. The overseas appeal Rentokil seems to be attracting has also awarded them a two-year contract with the US Center for Disease Control and Prevention to help battle the Zika virus for $30 million.
- Pinewood Studios - Pinewood Studios, a British film and television studio which is home to Star Wars: The Force Awakens and Bond film Spectre, expects its international customers to gain from the UK pull out and the pound’s falling value, stating it will make their services cheaper for those overseas. It is possible due to this they may gain more commercial contracts due to the results of the Brexit vote. Pinewood Studios has signed a contract for another major film production to begin August 2016.
- Ocado - Ocado is a British online supermarket whose goal is to provide their customers with the best shopping experience in service, range, and price. Unlike their competitors, e.g. Tesco and Waitrose, the company does not have any chain of stores and delivers all their products to customers directly from their warehouses. This British online grocer was experiencing difficulties before the referendum. However, Express recently reported that Ocado has entered a commercial contract with Morrisons. This agreement builds upon an earlier business relationship that began at the start of 2014 when Morrison contracted Ocado for their technology to launch an online service. However, this more recent deal is more far reaching, allowing for, among other things, home deliveries all throughout Britain. Bloomberg reports that the fall of the sterling due to Brexit might help Ocado become more profitable by making its service contracts for potential grocers, like that contract recently signed with Morrisons, cheaper. This may begin to appeal overseas retailers, and gives hope that its technology and services will be finally be utilized to its full extent.
It looks like these four companies here are likely to benefit from the Brexit. What are your thoughts? How do you think Brexit will impact commercial contracts in the next few years?
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