Business & Investment

Continuing Uncertainty Over Brexit Frustrates Swedish Business

Brexit may mean Brexit to Theresa May, but it doesn’t make so much sense to Swedish business.  As heavy snow fell in the Swedish capital, Stockholm, the reaction to the defeat in the House of Commons in Prime Minister Theresa May’s Brexit deal was a mixture of incredulity and despair.

Politicians across the spectrum – with the exception of the anti-EU Sweden Democrats – are mostly frustrated by British indecision over Brexit.  Most would still like Britain to stay in the EU –  but the more pressing priority is certainty,” observes James Savage, CEO, and Publisher of The Local, a European news network with headquarters in Stockholm. “Among ordinary people, there is a sense of astonishment at the political chaos – it has really dented the image of Britain.”

One of the effects of Brexit has been to strengthen support within Sweden for EU membership, now at its highest level for more than a decade.

Richard Falkenhäll, Senior FX Strategist at Sweden’s largest bank, SEB believes the May deal is unlikely to happen. “Brexit is dead,” he argues.

It’s very hard to go back to the EU and make a few amendments on some of the details and then bring it back again to the house. I don’t think they can do that. So we have to start to think about other alternatives to the deal. Why would the EU come back to the British government and say ‘hey, okay, let’s forget about the backstop on the Irish border?’ It’s hard to see how the EU could make any amendments that would be enough to satisfy the House of Commons.

This means, he says, “We now have to think now about all the other options, which range from revoking Article 50 to a second referendum. I can’t imagine any outcome between those two extremes – and that creates a lot of uncertainty.”

Swedish companies will be concerned about further delays to Brexit because it merely prolongs that uncertainty.

A Tough Call 

Britain is Sweden’s third biggest export market after the Nordics.  In 2016, Swedish exports to the U.K. were £10.9bn, compared with imports of £8.4bn.

One large exporter and importer to and from the U.K. is Volvo Construction Equipment (CE). Bill Law, Senior Vice President, Volvo CE says that it is important for the company, as well as its customers, and the U.K. generally, that the ultimate solution for Brexit is business-friendly.

He shares a sense of frustration expressed by many exporters in Sweden. “We are in the business of “building the future,”[but] we see that not knowing what to expect in terms of regulation and infrastructure plans going forward affects investments. At present things remain clouded in uncertainty, making it difficult to plan effectively.”

For instance, if a Swedish company is planning its inventories and wants to import from the U.K., after March 29 it could have to pay customs duty if there is no deal.

How can companies plan if they don’t know what they are planning for? “We are already seeing the negative consequences of this on capital expenditure and investment in the UK economy,” says Falkenhäll, “with investment in the U.K. declining for three consecutive quarters.”

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