Why Brexit vote prompted Vodafone to contemplate leaving Britain

Vodafone, the British telecommunications giant, wants the EU’s free 'movement of people, capital, and goods.' But it's unclear if that would continue after Brexit.  

"Brexiters" promised a departure from the European Union would save Britain money, allowing it to invest in public services and limit immigration. Less than a week after Britons voted to exit the EU, the world’s second largest telecom company has announced it is considering moving its headquarters from London to mainland Europe.

Vodafone said it is important to retain access to EU’s free “movement of people, capital, and goods,” it wrote in an emailed statement to several media organizations. "It is ... not yet possible to draw any firm conclusions regarding the long-term location for the headquarters," it said. "We will continue to evaluate the situation."

Vodafone’s concerns are symbolic of the fears companies that conduct business from Britain to the Eurozone have about the impact Brexit could have on their ability to move themselves, their products, and their services across the continent. Vodafone’s warning could perhaps foreshadow a possible shift in jobs and investments from Britain to the rest of the EU.   

“It will be more a movement on the margins than big, discreet changes,” Thomas Sampson, a professor at the London School of Economics (LSE) who specializes in international trade, growth, and development, tells The Christian Science Monitor a phone interview. “We might see some companies like Vodafone relocating their headquarters. We might see others investing less in the UK,” he adds, mentioning, as an example, a financial firm relocating jobs from London to Paris, Frankfurt, or other cities in the Eurozone.

Vodafone, the British telecommunications giant, is the seventh largest company on the Financial Times Stock Exchange 100 Index, with operations in 26 countries. With its London headquarters, and two operating divisions in other British cities, it has 13,000 employees there. Vodafone said 55 percent of its group profits in the last financial year came from its European operations. Britain, in comparison, provided 11 percent.

Vodafone said the single legal framework spanning all member states, and the freedom of movement, capital, and goods were “integral to the operation of any pan-European business.”

“It remains unclear at this point how many of those positive attributes will remain in place once the process of the UK’s exit from the European Union has been completed,” it said.

Negotiations for how Britain will leave the EU have not started, as the country has not invoked Article 50 of the Lisbon Treaty, the bloc’s governing treaty, which starts the process. In fact, Article 50 isn't likely until after Britain elects a new prime minister, now scheduled for September. 

Meanwhile, other corporations have started to voice concerns like Vodafone’s. Encocam, the crash-test dummy maker, told Reuters that Brexit has it reconsidering the hire of 120 employees by 2018 at its design and production hub near Cambridge. Managing Director Mike Ashmead is concerned new immigration rules could hinder his ability to hire engineers, designers and other skilled workers from abroad. The manufacturer is instead looking at Spain, Portugal, Ireland, Germany, or Poland.

Siemens, the German energy company, said it has put its plans to invest in new wind power in Britain on hold until its clear how Brexit will affect tariffs and trades, the Guardian reported.

These actions stand in contradiction to the “Leave” campaign, which said the country would provide more jobs to Britons, compared to immigrants, the country could negotiate its own trade agreements that benefit its manufacturers, rather than rely on EU agreements, and a more competitive market would lead to a more robust British economy.

Yet, Economists for Brexit, eight economists in favor of the referendum, argued the British economy is dynamic, and the negative affect Brexit would have on companies such as Vodafone might benefit other companies.

“In any industry there may be firms that think they will benefit from ‘Remain.’ But their interests, as with other vested interests, are theirs, not the UK’s. Therefore, the views of business are likely to vary by size of firm, by the sector they are in, and by their business model,” writes Economists for Brexit, in a pamphlet available on its website.

“The UK [labor] market is highly dynamic and would adjust to these changed trade arrangements quickly,” writes Ryan Bourne, the head of public policy at the London-based Institute of Economic Affairs think tank, in the pamphlet. “Assistance could be given by the UK government to disadvantaged industries (e.g. volume cars, agriculture) to manage their transition. The funds for such assistance would come from the funds we currently pay each year to the EU.”

Swati Dhingra, Mr. Sampson’s colleague and a lecturer at the London School of Economics, disagrees, telling the Monitor that Vodafone’s concerns are symbolic of a larger trend.

“It says even service trade companies, or companies that we think of as advanced manufacturers, are the ones moving their headquarters somewhere else,” she says in a phone interview Wednesday. “That is the real concern for the UK. It’s not bad jobs moving away. It’s good jobs potentially moving away.”

Of course, all of this depends on the trade agreement Britain and the EU hammer out within the next two years. If Britain becomes a member of the European Economic Area like Norway, it will have full access to the single market, but must follow EU laws, including immigration. Or, it could abide by international trade rules that could include tariffs and other trade restrictions.