Amazon Banks on Post Brexit Britain
Amazon leads a host of companies looking to enter the British market despite the uncertainty surrounding the U.K.’s move to leave the EU. The company is taking advantage of Britain’s loosened regulations to conduct drone delivery trials. Announcements of similar expansions have calmed fears that the British economy will take a critical hit once the Article 50 plans are completed.
Amazon Launches Major U.K. Staffing Increase
In a press release issued on Monday, Amazon advised that as many as 5000 jobs would be created to support expansions of the Alexa program, which is the company’s answer to Siri. Amazon has also built a new London office in the city’s Shoreditch tech hub, which will focus on drones, video on demand, and Amazon Web Services. Amazon is also looking to break into the U.K. fashion market, and analysts expect it to launch its own clothing brand sometime in the next year.
Major Companies Expand London Offices
Other major corporations are also expressing their faith in the English economy. Expedia is doubling its office space and extending its lease for almost 15 years. The move was praised by London’s mayor Sadiq Khan as proof of the city’s reputation as a leading business development center. Facebook, Apple, and Snapchat have also declared their intentions to increase staffing in their U.K. offices.
British Startups Worry Over Future
Despite signs of increased investment from international companies, several British businesses are looking to establish bases on the European mainland prior to Brexit taking effect. According to a poll conducted by Silicon Valley Bank, approximately 10 percent of British startups are considering relocating across the English Channel. Common fears include staffing issues, regulatory problems, and banking concerns. The U.K. has already seen a significant drop in fundraising, with venture capital expenditures falling by over one third since 2015.
British Banks Bear Brunt of Uncertainty
The Brexit plan hit British banks especially hard. Several have already started the process of moving employees to offices in other EU locations. HSBC saw profits drop by 62 percent in 2016. HSBC Holdings Chairman Douglas Flint referred to “unexpected economic and political events” when discussing the bank’s annual performance. But he did not specify the Brexit vote in his explanation.
Blair Fights Against EU Exit
The economic consequences of leaving the EU rank high among the complaints of Brexit critics. In an impassioned speech following the passage of Prime Minister Theresa May’s Article 50 bill in the House of Commons, former Prime Minister Tony Blair urged Bremain supporters to “rise up” against pulling out of the union under the terms May described in a White Paper released earlier this month. However, most active politicians are standing behind the results of the referendum. While several have called for amendments to the 12 point exit plan, few have expressly backed shelving it completely.
Will the House of Lords Block Brexit?
The next test for May’s Brexit strategy is the upcoming vote in the British Parliament’s House of Lords. Unlike the House of Commons, Lords do not fear a political backlash in the next round of elections. They serve at the pleasure of the Queen. The Lords and Ladies could either vote against the Article 50 request, or they could pass a substantially revised version. Then their counterparts in the lower house would vote on the amendment bill. But at this point, the opposition leadership has confirmed that while they will seek some amendments to the bill as received, they do not plan to keep May from meeting her March 31st timetable for triggering the Article 50 exit.
How Will the Amazon and Expedia Expansions Affect Trading?
The London FTSE should go up based on the renewed confidence in the British economy. Amazon is the largest retailer in the U.K.. Their commitment to regional growth should convince other companies to consider moving or expanding in the area. Both Amazon and Expedia had impressive year over year stats. Share prices in both companies should continue their upward trajectories. Once staffing in the new locations begins, lowered unemployment should help boost the pound. Traders should watch bank and fintech stocks carefully for signs of a drop. These businesses have not yet learned the final cost of losing licenses for working with their clients throughout Europe.