With Brexit having passed the first hurdle of the divorce deal, attention is now turning to what will happen after exit day in March 2019. Brexit supporters have long based their arguments in favor of a separation from the EU on two key expectations about what will happen once Brexit turns into a reality:
- The first is that Brits will gain from tightening immigration policies towards other EU countries. The thinking goes that restricting the future inflow of EU immigrants, including skilled workers, will offer more opportunities to British nationals.
- The second is that British firms will thrive in global markets to an even greater extent because the post-Brexit independence from EU bureaucracy will allow firms to be more effective in a global market. The underlying assumption is that British firms will become even more global as a result of more favorable trade agreements that Britain will be free to sign with other countries outside the EU.
To assess the likelihood of these two expectations coming to pass, we looked at the Fortune Global 500 list of the world’s largest firms. Specifically, to evaluate Brexit supporters’ first expectation, we analyzed the nationalities of the top management team and board of directors of these companies. Aligned with Brexit supporters’ convictions, British firms have indeed made a relatively larger use of the international flows of skilled immigrants than other EU firms. Overall, 38% of the senior management of British firms are foreign nationals, double the German figure of just 19%. However, where the irony kicks in, is that most of that 38% are non-EU foreign nationals. In fact whereas 14 of Germany’s 19% come from other EU countries, the same figure for the UK is only 13%. By contrast, the non-EU figure for Britain stands at 25% versus just 5% for Germany.
Similar findings emerge when looking at boards of directors: 37% of British board membership is comprised of foreign nationals (14% EU nationals and 23% non-EU nationals) versus just 15% for German firms (12% EU nationals and 3% non-EU nationals). So, while the claim that British firms have internationalized their talent pool more than most is indeed true, those skilled workers are not in fact coming from EU countries. As such, will Brexit actually have the desired effect of keeping more jobs at the high end for Brits? The data seems to say “no.”
What about the second premise, that leaving the EU will allow British firms to be more globally-oriented? The fact is that the higher-than-average internationalization of British firms’ top management teams and boards of directors have already contributed to British firms being more global. When looking at the distribution of sales, what one first notices is that EU firms overall are the most globally oriented firms, with an average of 41% of their sales coming from outside the EU. North American and Asian firms derive respectively only 33% and 26% of their sales from outside their home region. Moreover, British firms are among the most globally oriented within the EU, as on average 46% of their sales come from outside the EU. The hundreds of bilateral trade agreements that the EU has signed over time with countries around the world have been a fundamental enabler of EU firms’ internationalization outside the EU. British firms have therefore been among the ones that have benefitted the most from these agreements.
Can it be certain that bilateral agreements negotiated post-Brexit will assist British firms in becoming even more global than they currently are? It seems ironic to note that Brexit will force the very British firms out of these trade agreements that have made the most use of them until today.
Will leaving the EU result in more high skilled jobs for British nationals? Will leaving the EU make British firms even more global? The irony of these Brexit assumptions does in fact lie in the data.