Greenwich Associates: Brexit Will Bring More Pain for Banks and Corporations

The firm surveyed U.K. and European companies, which said Brexit’s potential upsides do not outweigh its downsides.

Luke MacGregor/Bloomberg

Luke MacGregor/Bloomberg

Brexit’s worst is yet to come for companies and banks in the United Kingdom and Europe, according to new research from Greenwich Associates.

Survey respondents told Greenwich that any potential upsides of the United Kingdom’s looming exit from the European Union will not outweigh its downsides, the research firm said in a report published Wednesday.

The uncertainty of what Brexit will look like is a major driver of company concern, according to Greenwich.

“Right now, we do not know whether it’s going to be a no-deal Brexit, a Theresa May hard Brexit, a soft Brexit, or even no Brexit,” said Thomas Jacques, principal at Greenwich Associates, by phone Thursday. “That uncertainty is the issue.”

Greenwich surveyed 61 treasury professionals between May 30 and July 8, at corporations with sales in excess of €500 million ($552 million) in both the United Kingdom and Europe, about how the Brexit vote is impacting their businesses, operations, and bank relationships.

About a quarter of large European companies that responded to the survey said their business has already been hurt by Brexit. What’s more is that two thirds of survey respondents in the United Kingdom said they believe Brexit will have a negative long-term impact on their business, according to Greenwich.

The same is true for one-third of respondents in continental Europe, Greenwich said.

“I don’t think we were particularly surprised by the results,” Jacques said by phone. “It’s quite stark when you see it in the numbers, though.”

According to Greenwich, Brexit has already triggered changes in how companies handle cash management, lending and working capital, and trade finance, among other areas. Ninety percent of survey respondents said they are ready for the present and future challenges presented by Brexit, according to Greenwich.

[II Deep Dive: Cambridge Associates: Investors Should Ignore Brexit Distractions]

This, though, is no thanks to advice proffered by banks, according to Greenwich. Just 56 percent of survey respondents said that banks provided them with clear and effective advice on Brexit, the survey showed.

According to Tobias Miarka, managing director at Greenwich Associates and the co-author of the report, the impact of Brexit changes related to companies’ finances is still playing out.

“Unfortunately for U.K. banks, especially for those without significant operations on the continent, none of these changes seem to be working in their favor,” said Miarka in a statement. “Instead, a series of Brexit-triggered changes in corporate demand and preferences appear to be lining up as new headwinds for U.K. banks as they prepare to compete in a post-Brexit Europe.”

And despite talk of opportunities that Brexit may bring, “it is also worth noting that not a single company without a presence in the U.K. plans to commence operations there in a post-Brexit environment,” Miarka added.