Many U.S. firms playing catchup after surprise EU exit vote

Sun Jun 26, 2016 7:54am EDT
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By Timothy Aeppel and Nick Carey

NEW YORK/CHICAGO (Reuters) - The risk that Britain could yank itself out of the European Union had been telegraphed for over a year, but even U.S. companies with "Brexit" contingency plans have said they were shocked it is now on track to become reality, and are just beginning to work through all of the implications.

Caught off guard, some U.S. firms have rushed to place foreign currency orders hedging against further declines in the British pound. Many are seeking legal advice on the impact on trade agreements and regulations, while others begin to consider a potential drop in demand from European economies, company executives and consultants told Reuters.

International law firm Dechert LLP received so many calls from business clients after Thursday's referendum result became clear that it set up a special hotline to handle the volume.

While heavily regulated financial services and insurance companies were relatively ready for a Brexit, "most of the others haven't prepared at all," said Miriam Gonzalez, the London-based co-chair of Dechert's international trade and government regulation practice.

"It has come as a massive shock and many businesses are struggling to digest that today," Gonzalez said on Friday.

One U.S. CEO went to bed on Thursday night thinking Britons would vote to stay in the EU. He awoke before dawn on Friday to find out it had swung the other way. One of his first calls was to his finance office, directing them to hedge against further declines in the pound.

"We’re a little naked on that," said Dan Ariens, CEO of Ariens Co, a family-owned maker of lawn and garden equipment based in Brillion, Wisconsin, “because it was kind of a wait-and-see situation.”

Ariens, with sales of about $700 million last year, operates a factory in Britain – its only one outside the United States — producing riding lawn mowers for the UK and other European countries. "The value of my (UK) business just dropped," Ariens said.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 24, 2016. REUTERS/Lucas Jackson