Brexit’s Promises and Challenges, Five Years On

What changed after Brexit

Five years ago today, on June 23, 2016, Britain voted to leave the European Union. The separation has hardly been smooth, and in some ways the effects have yet to appear, Eshe Nelson, The Times’s London-based business reporter, writes for DealBook.

The Brexit vote upended Britain’s politics, divided its people and fundamentally altered its business environment.

Some of the fallout was immediate. The day after the referendum, the value of the British pound plunged the most in its history, setting off a period of rising inflation.

Other effects have emerged more slowly. In the past six months — after Britain formally left the bloc’s single market and customs union — the impact has been harder to discern through the turmoil of the pandemic.

After the vote, business investment stalled. Companies were too unsure about Britain’s major trading relationships to make big decisions. By the time there was any certainty, the coronavirus had hit British shores. Now, the government is planning a “super deduction” tax break to bolster investment. That could spur spending, but the underlying pace of growth is unlikely to return to its pre-referendum level.

It’s too soon to unpick the overall impact on trade, especially for more than 180,000 British businesses whose only experience of international trade was with the E.U. New customs checks, veterinary requirements and other regulations have already restricted the movement of goods, and new agreements with far-flung countries aren’t expected to replace the deal Britain had with its nearest neighbors as a member of the E.U. By the government’s own estimates, its new trade deal with Australia will increase G.D.P. by as much as 500 million pounds (about $700 million) over 15 years, or 0.02 percent of output.

The financial services industry, one of Britain’s most prosperous sectors, resigned itself early to diminished status in Europe. This year, European shares and derivatives trading has shifted out of London, and banks are still moving employees to other European capitals. In response, the British government is trying to revive London’s reputation as a finance hub by overhauling rules on listings — welcoming SPACs, among other things — and loosening regulations for start-ups.

For many, Brexit was never about the economy; it was about immigration. Industries that relied heavily on European workers warned from the start about a looming labor crisis as it became harder for E.U. citizens to move to Britain. As the country recovers from the pandemic, that crisis has arrived.

Restaurants and hotels have been thwarted by staff shortages. There are warnings that there aren’t enough food production workers or truck drivers. Pandemic restrictions were a factor in foreign workers leaving the country, and industry groups are lobbying the government for exceptions to visa rules so that more chefs, truck drivers and butchers can be hired from the E.U., as they don’t expect those workers to easily return (or enough locals to step into the roles).

Britain’s last year in the bloc coincided with its worst recession in three centuries because of the pandemic. Recovering from Covid won’t be easy for any country, but businesses in Britain are also contending with the end of a four-decade economic union. It could be another five years, or more, before we know the true shape of Britain’s post-Brexit economy.

HERE’S WHAT’S HAPPENING

Eric Adams is leading the race for New York City mayor. The Brooklyn borough president fell short of outright victory in the Democratic primary, meaning that a winner will likely be decided under the new ranked-choice voting system. Andrew Yang, who is running fourth, conceded; the former Citigroup executive Ray McGuire is much further behind. In the primary contest for Manhattan district attorney, Alvin Bragg is narrowly leading Tali Farhadian Weinstein.

A pro-democracy newspaper in Hong Kong will shut down. The publisher of Apple Daily said the 26-year-old publication would cease operations on Saturday. Its financial accounts were frozen and its owner, the media mogul Jimmy Lai, and top editors were arrested amid a crackdown by Beijing-allied authorities in the territory.

The U.S. will miss its July 4 vaccination goal. President Biden doesn’t expect to meet his target — 70 percent of U.S. adults receiving at least one shot — by that date, amid a slowing inoculation rate among younger adults. Separately, several countries that relied on Chinese-made vaccines are battling new Covid-19 outbreaks, raising questions about the shots’ efficacy.

More signs of a rebound in housing. Existing home sales fell for a fourth straight month, because increased demand has outstripped the available supply. (Sales are up nearly 45 percent versus a year ago.) Meanwhile, the Blackstone Group re-entered the business of single-family home rentals by buying Home Partners of America for $6 billion.

Microsoft joins the $2 trillion club. The tech giant became only the third publicly traded company to reach a $2 trillion market cap — after Apple and, briefly, Saudi Aramco — as shares in tech giants continue to outpace other stocks. Unlike its peers, however, Microsoft has largely avoided the heightened antitrust scrutiny now facing Big Tech, potentially setting it up for greater gains.

Morgan Stanley mandates vaccines — for everyone

Morgan Stanley will require employees to be vaccinated against Covid-19 in order to return to its New York offices next month, The Times has confirmed. That goes further than many other big companies, and what’s more, the bank will also require contingent workers, clients and visitors entering Morgan Stanley’s buildings in New York City and Westchester to be vaccinated.

The bank won’t require proof of vaccination, but staff members who don’t report that they are fully vaccinated by July 12 will be required to work remotely. Some of Morgan Stanley’s institutional securities, investment and wealth management divisions already allow only those who say they have been vaccinated to work in the bank’s offices.

Companies across the U.S. are grappling with their vaccine policies. The Equal Employment Opportunity Commission said last month that it was legal for companies to ask employees about their vaccination status, and that companies could require workers to be vaccinated to come to the office. Still, many senior executives worry about pushback from employees, with few companies mandating vaccines.

Wall Street firms have taken a variety of approaches. This month, Goldman Sachs required its employees in the United States to report their vaccination status. Other big banks, including JPMorgan and Bank of America, are encouraging workers to disclose their vaccination status voluntarily. BlackRock will reportedly allow only vaccinated staff members to return to the office beginning next month.

“Amazon is changing the nature of work in our country and touches many core Teamster industries and employers.”

— A resolution from the International Brotherhood of Teamsters, which will be put to a vote at the union’s convention tomorrow, would make it a priority to organize Amazon workers and help them win a union contract. The Teamsters would “supply all resources necessary” to the effort, the resolution reads, and would create a dedicated Amazon division at the union.

Exclusive: M.L.B.’s newest player is a crypto exchange

As cryptocurrency becomes more mainstream, the industry’s businesses are trying to raise brand awareness. To that end, the global crypto exchange FTX is launching a five-year international partnership with Major League Baseball today, DealBook is first to report. It is the first such deal between a pro sports league and a crypto exchange, the partners say.

Sports and crypto increasingly mix. M.L.B. is already in the blockchain business via non-fungible tokens, and FTX recently inked a deal for naming rights to the N.B.A.’s Miami Heat arena. Baseball’s fan base is “huge” and overlaps with crypto enthusiasts, said Sam Bankman-Fried, the exchange’s founder and chief executive, a Californian who works out of Hong Kong. The parties did not disclose the financial terms of the deal, which includes worldwide marketing rights and the use of game highlights in FTX content.

The crypto exchange will become the first company to sponsor a patch on umpire’s uniforms, starting with the All-Star game in July. “Umpires represent trust, integrity and accountability,” said Noah Garden, the M.L.B.’s chief revenue officer, noting that FTX “embodies the same principles.” From the exchange’s perspective, Bankman-Fried said, the patch is distinct and puts FTX’s name right in the game.

“We are here to stay,” Bankman-Fried said about the message FTX is trying to send with the sponsorship. Crypto markets have taken a beating recently, but he is confident in the industry’s long-term prospects. One of the industry’s biggest growing pains, he said, was American officials’ “slow roll” approach to establishing a comprehensive framework for crypto regulation.

THE SPEED READ

Deals

• A primary driver behind the $30 billion sale of the medical supplier Medline: its founding family’s desire to avoid a Democratic-driven tax hike. (Bloomberg)

• The eyewear retailer Warby Parker filed confidentially for an I.P.O. Separately, Krispy Kreme is aiming for a valuation of nearly $4 billion in its offering. (Reuters)

• Direct listings have failed to live up to the hype as a better alternative to I.P.O.s. (Bloomberg)

Politics and policy

• The Fed chair Jay Powell said the central bank was aiming for “more inclusive prosperity,” signaling a focus on eliminating economic inequality. (NYT)

• F.D.A. staffers objected to the approval of a new Alzheimer’s drug, newly released memos reveal, after several advisers to the agency resigned over the move. (WSJ)

Tech

• Lobbyists for Big Tech are blitzing Washington to head off bipartisan support for six bills meant to undo the dominance of Amazon, Apple, Facebook and Google. (NYT)

• Masa Son of SoftBank defended his company’s corporate governance at its annual shareholder meeting. (FT)

• The data analytics company Splunk raised $1 billion from the tech investment giant Silver Lake. (Insider)

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