May Closes In on a Brexit Deal But Can’t Stop Business Leaving

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Just as Prime Minister Theresa May is closing in on a Brexit deal, the march of companies quitting Britain is getting louder.

On Tuesday alone, CME Group Inc. said it’s moving its $240 billion-a-day short-term financing market to Amsterdam from London in another blow for the City, while German ball bearings maker Schaeffler AG announced the closing of two of its three British plants. Hours later, surgical appliances manufacturer Steris Plc said it plans to move its corporate base to Ireland from the U.K.

Their timing isn’t as odd as it seems. Whatever May agrees in Brussels, it won’t put an end to the uncertainty that has dogged companies since the referendum in 2016. A deal will buy them time -- a two-year grace period will maintain the status quo -- but then another cliff-edge will probably emerge in December 2020.

The deal that May is working on is full of fudge and postponed decisions, leaving the U.K. Cabinet fighting about whether the guarantees Britain is offering could end up binding the country into the European Union’s trading system forever. Companies would be delighted if that were the case, but pro-Brexit politicians are horrified at the prospect. So companies can’t plan in case the Brexiteers get their way -- either now or in the years ahead.

Banks were the first to execute their plans, as they were quick to realize that the transition period wouldn’t be legally binding until it was far too late to be of use to them. While it was agreed in principle in March this year, it won’t be set in stone until the divorce deal is inked. The best estimates put that in December -- just three months from exit day.

Manufacturers took a bit longer. May had promised them that she would fight to keep trade as frictionless as possible with the EU. Moving car plants is more cumbersome than moving a few bankers and the investment cycles mean decisions take time. But other companies are now catching up: Recent examples include Smurfit Kappa Group Plc abandoning a plant, Panasonic Corp. moving to Amsterdam and the retailer of Muji products looking for a new base.

May probably didn’t have much alternative to a go-slow approach with Brexit, as it was the only way to bring her party with her and avoid an all-out revolt. She has slowly led her Cabinet toward a closer relationship with the bloc than many in her party want. The trouble is, by the time that new relationship is clear -- and legally binding -- many companies will have already decided to go.

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