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BREXIT - WHAT HAPPENS NOW AND WHAT DOES IT MEAN FOR SWEDISH COMPANIES AND SWEDEN?

What does it mean that Britain leaves the EU?

We are now entering a long period of uncertainty. The first step in the UK is that the British government will activate Article 50 of the Lisbon Treaty, which in practice is the country's application to withdraw from the EU. Thereafter negotiations commence, which can take at least two years but probably several more years.  

Britain is Sweden's fourth largest export market and the news that Britain voted to leave the EU affects Swedish companies. The impact of the effects will be clear when we understand what type of trade agreement the UK manages to negotiate with the EU. Considering the substantial trade between EU and the UK, the preconditions for a favourable trade deal are good.

What impact will Brexit have in the UK?

No country has previously voted to leave the EU and it is almost impossible to estimate the effects of Brexit. However, there is consensus among economists that Brexit have negative effects on both the UK and EU as well Sweden. Oxford Economics recently unveiled - in connection with a seminar organized by Business Sweden together with Oxford Economics - results from simulations of the effects of Brexit at various types of trade. The estimated long-term effects of a Brexit shows that British GDP can grow up to a four percent lower rate in 2030 compared to the baseline scenario. The lowest will be the effect if there is a liberal customs union and at most it only becomes a trade agreement with the WTO. The most likely is an arrangement between these two extremes.

What impact will Brexit have on Sweden's trade with the United Kingdom?

Britain is one of Europe's fastest growing economies, and for many years one of the most important international markets for Swedish companies. Britain is Sweden's fourth largest export market, and an important import market. There are about 1000 established Swedish subsidiaries in the UK. Demand for Swedish products and services have been strong in recent years. The announcement that Britain leaves the EU cooperation will affect the Swedish companies. How big the effects are going to be will stand clear when we know the type of trade agreements that the UK manages to negotiate with the EU. Considering the substantial trade between EU and the UK, the preconditions for a favourable trade deal are good.

What effect will Brexit have on investments in the UK?

Given that Britain is the EU's biggest recipient of foreign direct investment, an exit from the EU is likely to have a major impact. A relevant question in this context is whether London will remain a financial centre or not. There is reason to believe that the city's role as financial centers will decrease.

What is the effect on investments in Sweden?

British companies have today invested 300 billion in Sweden, which is 13% of foreign direct investment in Sweden. If Britain does not “succeed” in negotiating an exit with the EU, British companies are likely to add production units in an EU country to access the internal market. Companies will then seek production opportunities in countries that have compatible expertise and industry as well as proximity to customers. This provides good opportunities for Sweden and other EU countries to attract direct investment from the UK.

How will Swedish companies with operations in the UK be affected?

In the short term there will be no major changes, but in the long term, new trade agreements change the game plan. Swedish companies are competitive and have for a long time been present on the British market. There are many indications that there will be good prospects for trade with the UK in the future. Business Sweden will now begin an analysis to map out the effects and opportunities Brexit can give Swedish companies to come.

Will Sweden’s position in the EU weaken?

Yes, most likely. This is because Britain is a close ally when it comes to power issues within the EU, such as free trade and member nation’s right to decide for themselves. There will be a lively debate in the wake of Brexit and therefore it is more important than ever to be active in the debate, find new partners and at the same time safeguard Swedish interests in the new Europe that will emerge.

How long will it take before Brexit is enforced?

It is a process of at least two years, but most analysts believe it will take much longer than that before any agreement is in place. There are many uncertainties that could significantly affect the withdrawal process.

What risks do we see?

All the uncertainty is an unpredictability that creates instability, which is not good for investment, trade and economic development. It is therefore important that the process of withdrawal is clarified quickly and that the withdrawal takes place in a controlled manner. Otherwise there is the risk that the notion of leaving the UK quickly spread to other member countries, which in turn could lead to further instability.