Brexit adds headwinds to U.S. companies slowing spending

Mon Jun 27, 2016 12:36am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Lucia Mutikani and Malathi Nayak

WASHINGTON/NEW YORK (Reuters) - U.S. business investment, already heading for its worst slowdown since the global financial crisis, could decline further as Britain's vote to leave the European Union creates more risks for companies, economists say.

With growth tepid at home, North American companies as diverse as plane maker Boeing Co (BA.N: Quote), Ford Motor Co (F.N: Quote), heavy equipment manufacturer Caterpillar Inc (CAT.N: Quote) and oil producer Exxon Mobil Corp (XOM.N: Quote) now will find themselves trying to plan overseas spending without knowing whether Britain's departure from the EU will upend tariff rules.

"The 'leave' outcome has introduced substantial uncertainty that likely would dampen U.S. growth by delaying and or reducing business investment and consumption expenditures," said William Lee, head of North America Economics at Citigroup in New York.

Lee said U.S. multinational corporations face difficult strategic challenges - including assessing the U.K.'s future status as a gateway to the E.U. and London's role as a financial center - that could crimp spending enough to reduce potential growth levels and real incomes.

U.S. business spending on capital equipment dropped over the last two quarters and contracted in the first quarter at its quickest pace in seven years. A further decline in the second quarter would be the first time since the 2007-09 recession that it contracted for three straight quarters.

Jim Farley, top European executive for automaker Ford, had warned a "Brexit" outcome could impact "potential future investment."

Caterpillar has voiced concern any changes in trade rules for its UK base would impact its European supply chain.

While recognizing that UK exit negotiations will be complex, Caterpillar's UK chief Mark Dorsett urged leaders in a statement to ensure "single market access issues be prioritized to lessen the negative impact on business."   Continued...

Britain's Prime Minister David Cameron speaks after Britain voted to leave the European Union, as his wife Samantha watches outside Number 10 Downing Street in London, Britain June 24, 2016.   REUTERS/Stefan Wermuth