The Brexit vote has brought a lot of economic uncertainty. Global markets have already lost $3 trillion as a result of a sharp equity sell-off. On June 24, the next day after the ‘in / out’ referendum, the British pound fell to $1.3228, a 31-year low. Some financial analysts forecast that the “pound could hit parity with the U.S. dollar by the end of the year or early in 2017”. Some international companies based in the UK are considering moving their operations to mainland Europe as they are afraid that Brexit can limit their access to the EU market and cut them off from the free trade agreements (FTAs) the EU has signed with other countries. The Brexit vote has also challenged the UK’s attractiveness for international investors. 66% of members of the Confederation of British Industry (CBI) warned before the referendum that Brexit would reduce foreign direct investment (FDI). 40% believed that it would deter investment from the EU. 36% forecast that it would harm the UK’s competitiveness. These challenges are reflected by changing international perceptions of Brand UK after the Brexit vote.
The UK ranks 12th in the Country Brand Index 2014–2015 by FutureBrand, a brand consultancy. Out of 75 countries reviewed, only 22 met the criteria for a strong country brand. The analysis focused on 7 perceptional dimensions: (1) awareness, (2) familiarity, (3) preference, (4) associations, (5) consideration, (6) decision / visitation and (7) advocacy. Special attention was given to associations. They were analyzed in terms of 6 attributes of status and experience: (1) a value system, (2) quality of life, (3) business potential, (4) heritage and culture, (5) tourism and (6) ‘Made In’ expertise. To put it in a nutshell: if people perceive a country as a strong brand, they are more willing to use its products and services as well as to “visit, recommend and do business with it”.
According to FutureBrand’s ranking, the UK has built the 5th strongest country brand in the EU after Germany (3rd position), Sweden (4th), Denmark (9th) and Austria (10th). Membership of the EU does not determine the strength of a country brand directly: Switzerland’s brand is the 2nd best perceived in the world after Japan’s. However, Brand UK could still be weakened by the Brexit vote. There are 2 attributes of the brand strength which could be compromised: (1) Britain’s suitability for doing business as well as (2) safety and security. Their perception strength is estimated at about 38% and 45% respectively. Many international investors have chosen to set up companies in the UK to access the EU market as well as to benefit from its FTAs with other countries. Now its legal status is unclear: it will take at least 2 years to create new legal infrastructure. In the meantime, international companies will face a lot of legal changes and insecurity.
The UK’s ‘Made In’ expertise has one of the best perceptions in the world. It ranks 9th in FutureBrand’s ranking of customers’ preferences for national product brands. The Brexit vote could decrease the attractiveness of British production abroad if UK-based companies had limited access to the EU market and the markets which are covered by the EU FTAs. One of the biggest challenges would be non-tariff barriers. Prof. Steve Woolcock of the London School of Economics and Political Science (LSE) has estimated that British companies “[…] could face barriers equivalent to an average of 20%”. They would also incur similar costs trading with the US and other major markets. As a result, the exposure of British brands abroad would be limited, and the product prices could increase. This would decrease the familiarity of international consumers with British products and their appeal. The ‘Made in UK’ brand would become less competitive than other national product brands.
Forrester, a research and advisory firm, claims that the Brexit vote will make it difficult to attract international talent. There were many anti-immigration slogans in the leave campaign. Pro-Brexiters argued that immigrants from the EU member states are taking too much advantage of Britain’s social welfare system, and are not contributing enough to the state budget. They ignored the actual economic data. The University College London (UCL) Centre for Research and Analysis of Migration (CReAM) has found out that European immigrants have paid more in taxes than received in benefits: “European immigrants who arrived in the UK since 2000 have contributed more than £20bn to UK public finances between 2001 and 2011. […] Over the period from 2001 to 2011, European immigrants from the EU-15 countries contributed 64% more in taxes than they received in benefits. Immigrants from the Central and East European ‘accession’ countries (the ‘A10’) contributed 12% more than they received.” The UCL CReAM has also calculated that the immigration of skilled EU workers has given Britain human capital which would have required an investment of £6.8 billion (over $9 billion) in their education.
The decision to leave the EU has brought a lot of concerns about new immigration regulations. Most likely EU citizens will need to deal with more bureaucracy. Bureaucratic procedures for non-EU citizens could also change. The anti-immigrant discourse of the pro-Brexit campaign signals that the UK will be willing to toughen up the entry rules. There was a suggestion for introducing an Australian style point-based immigration system to select skilled migrants. It is likely that stricter bureaucratic procedures will be deterring international talent from developing their professional career in Britain. This can decrease the impact of the live-and-study factor on Brand UK – one of the main drivers of its attractiveness. FutureBrand has estimated its perception strength at about 46%. The Brexit vote and its bureaucratic implications also indicate that British society will be perceived as less tolerant. The perception strength of British tolerance is estimated at 30%. The more unwelcoming both bureaucratically and in everyday life the British society appears to be, the less attractive Britain will be for international talent. It will be more challenging to develop innovative solutions and keep up with competitors with smaller skilled human resources. The UK’s competitiveness and economic growth will get worse if international investors decide to invest in countries which can better attract international talent.
References:  Nicole Bullock, Financial Times /  Alice Foster and Tom Batchelor, Sunday Express /  Joseph Adinolfi, MarketWatch /  Confederation of the British Industry via Global Counsel, BREXIT: the impact on the UK and the EU /  FutureBrand (I) /  Kathryn Dill, Forbes /  Kate Belan, Popsop /  FutureBrand (II) via Alex Berry, Design Week /  Steve Woolcock, BrexitVote /  Chris Ward, MyCustomer /  University College London