Kantox and Brexit: ‘Don’t Panic!’
22 June 2016 · 3 min read
Since we are a British company, many of you have asked us in recent days what we’re going to do if the British citizens vote for a Brexit, and specifically how this would affect Kantox and our clients.
As currency specialists, working on the basis of scenario projections and against an uncertain backdrop is business as usual for us. We are prepared. We carried out a detailed analysis of the potential regulatory and legal impact of a Brexit on the company months ago – something which I imagine has also been done by all companies with a presence in the UK and a prudent CEO.
If the UK does opt for an exit, then the real key lies in the negotiations that take place from 24 July onwards on the subject of immigration and talent attraction, passports for financial services firms, and customs barriers, to name but a few examples.
A vote against remaining in the European Union would bring with it months of uncertainty. This could last some two years while the new legal framework is thrashed out and all of the relevant treaties are reviewed in order to mark out the new playing field.
A Brexit could barely impinge on the real economy, or it could just as well have a major impact. It will all hinge on the subsequent agreements. Nevertheless, the consequences along the way can be predicted fairly easily: depreciation of the pound and uncertainty.
These two factors would not take long to cause repercussions for companies like us and our clients, and their businesses: the world of investments and foreign trade is poised in the firing line, waiting with bated breath. Having said that, how would a possible Brexit really affect Kantox?
British financial services firms such as ourselves would need a second base in the European Union. However, practically all, if not all of them, already have one – ours is in Barcelona.
Whatever happens in the vote, going forward the UK will continue to use the pound. Similarly, in the European Union we will keep using the euro, and international trade with Britain will not cease, so Kantox’s currency management service will remain just as necessary for our clients on both sides.
Or even more so. If a Brexit leads to a more volatile pound, our Dynamic Hedging solutions will be more crucial than ever for our clients.
Here at Kantox we have almost 2,000 clients from 20 different countries. Each of these would feel the impact differently. And even within those companies based in the UK, exporters and importers are not in the same boat. The effect of the pound’s depreciation would differ depending on type of business and margins, as well as the exposure generated.
What’s more, a distinction must be drawn between the impact of the referendum and that of a Brexit, if voted for.
The impact of the referendum has been defined by volatility and potential for panic. This has been the name of the game thus far.
Where our clients with GBP exposure are concerned, we have worked hand in hand to devise a contingency plan to protect their margins throughout this period of uncertainty.
The impact of a Brexit, meanwhile, would be linked to the depreciation of the pound and a possible recession.
This second scenario is another part of the risk management strategies that have been implemented by companies. Some businesses will suffer on account of it, yet others will capitalise on the new state of affairs.