European CFOs, treasurers see Brexit as increasingly likely

A survey of corporate treasurers and chief financial officers (CFOs) in the UK and continental Europe shows that more than half believe there is a medium to high risk that the UK will leave the European Union (EU).

Ahead of the referendum on June 23, market intelligence and advisory services provider Greenwich Associates interviewed treasurers at 90 large corporates in the UK and continental Europe from April 12-27. Most of these executives think a so-called “Brexit” would be a disorderly and potentially volatile process, yet most corporate officers have not taken any actions to minimise the negative effects of a UK exit on their companies.

The study aimed to discover how businesses are dealing with the uncertainty in the run-up to the vote, how prepared companies are for an outcome that is becoming increasingly likely, and whether the looming referendum is impacting companies’ investment strategies and relationships with their banks.

Among the study’s main findings:
• Companies in the UK and continental Europe see Brexit as a real possibility.
• Given companies’ deep levels of integration across the two markets, corporate treasury officials think a UK exit would have a significant impact on their own businesses and overall trade.

Despite these findings, relatively few executives have put in place security measures to protect their companies from the expected volatility.

Fewer than one in four of the corporate treasurers interviewed had put in place any hedges to protect against currency and/or interest-rate volatility – the two areas of risk exposure cited most frequently by study participants.

Companies have taken even less action on other risks that they see as possible but harder to measure and protect against. Among such risks cited by CFOs are significant changes in regulation effecting trade and capital mobility, decreased access to liquidity and increasing cost of funding, and the possible introduction of a withholding tax.

“These risks are much on the mind of corporate executives, but companies have taken little or no action to mitigate them,” says Dr Tobias Miarka, Greenwich Associates Managing Director and author of the report ‘Brexit: Is Hope a Strategy?’

Impact on trade and banking

Although most UK treasury officers are confident that a Brexit would not reduce UK/EU trade, one in four corporate treasurers in continental Europe think a UK exit would have a negative effect. Greenwich comments that these concerns should be getting more attention in the UK, since some Continental corporate executives say they are already planning to move operations located in Britain back inside the EU, should the UK vote to leave.

“Rather than turning to UK banks for helps navigating the complexities of newly discrete markets, Continental corporates suggest they will simply move operations out of the UK,” said Miarka.

In the political debates leading up to the June 23 vote, Brexit proponents have made the case that potential losses in trade with the EU would be offset by corresponding gains in trade with the rest of the world. UK treasurers and CFOs are not convinced; only 10% of those interviewed believe Brexit will help increase trade with partners outside the EU.


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