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Theresa May Assures IBM, Amazon, Goldman Sachs About Brexit

Zacks

Britain’s Prime Minister Theresa May met the business heads of several leading U.S. companies in New York on Monday. The meeting was aimed at assuaging anxious U.S. companies investing in Britain that the impending Brexit will not affect mutual business ties.

The majority of those who had assembled comprised chief executives from the financial sector. However, representatives from entertainment and technology companies were also present.

May emphasized that the reciprocity in doing business between the two countries was enough to make current and potential investors feel secure. At present, the U.S. is the largest investor in Britain, accounting for more FDI than any EU member country.

Industry Apprehensions


Among those present at the meeting were the heads of Goldman Sachs GS and BlackRock BLK, both of which have a Zacks Rank #2 (Buy). Finance companies had expressed concerns over the fallout of a Brexit even before voting on the referendum had begun. These included JP Morgan JPM, which has 16,000 employees in Britain.

Currently, these companies are aggressively asking Britain to retain access to the EU’s single market. Also present at the meeting were the heads of United Technologies UTX, Morgan Stanley MS, Merck MRK and Amazon.com AMZN each of which has a Zacks Rank #3 (Hold). IBM IBM, which has a Zacks Rank #4 (Sell), was also represented. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Economic Data Leads to Optimism

In the aftermath of the surprise Brexit result, Britain’s own companies had reduced their investment in the country. This had created even more apprehensions regarding the impact of this result on the country’s economy. However, recently released data reflects significant economic resilience in the wake of the vote.

The IHS Markit manufacturing PMI index, released earlier in the month, has increased to a 10-month high. The reading of 53.5 for August was also substantially higher than July’s reading when the sector had undergone a contraction. In August, a manufacturer’s survey indicated that exports had risen to a two-year high.

Additionally, the Bank of England kept its forecast for this year’s GDP unchanged at 2%. This means that steps taken by the central bank aimed at shoring up the economy in the wake of the referendum have been largely successful.

May Provides Reassurance

Prime Minister May emphasized that nearly a million people in both the U.S. and Britain were working for companies of the other country. Such a degree of reciprocity would ensure that U.S. companies had significant incentive to remain invested in Britain.

The major point of concern among investors was regarding the amount of access Britain based companies would have to the EU’s single market. A “hard Brexit” would mean that Britain would lose access completely and would have to renegotiate fresh trade agreements with EU member countries.

May emphasized that her government would work toward getting a favorable deal for Britain. Such an agreement would encompass both goods and services. She added that Britain’s government would work to open up trade even further between Britain and its partner countries.

In Conclusion

Despite May’s assurances, U.S. companies investing in Britain remain concerned about upcoming negotiations which will determine its economic relationship with the EU. Foreign investors will be reassured about investing in the country if the present British government manages to secure favorable terms for itself.

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