With the UK’s referendum on European Union membership taking place this month, new research from Grant Thornton’s International Business Report reveals that the European business community is fearful of the impact a Brexit would have on the continent’s economy.

The report says European businesses remain resilient in the face of various economic pressures, but there is evidence that a major event like a Brexit or a worsening of the migrant crisis could put that resilience to the test.

Grant Thornton asked business leaders across Europe what impact a British exit from the EU would have on the continent, and 79% of those surveyed within the eurozone believe a Brexit would have a negative impact. By comparison, fewer than 4% believe it would be positive.

In the UK, 68% of firms believe that Brexit will have a negative impact on Europe, and the figures are also high among businesses in countries with long-standing trade relationships with the UK including Ireland (96%) and Germany (89%).

Michael Crowe, a Director at Grant Thornton in the Isle of Man, said companies in the Island which do business in the UK and EU will find the research useful.

He explained: ‘It remains unclear what the outcome of the referendum will be, and what the impact will be whatever the decision is. Although we are not in the EU the referendum will have implications for the Isle of Man, and the current situation leaves a great deal of uncertainty for Island firms which do business with eurozone countries, including the UK.

‘It is difficult to plan for the future when there is so much doubt over what shape it will take, so detailed research like that undertaken for the latest International Business Report will be invaluable for Island firms trading within the EU. It offers insight into the attitudes and opinions of business leaders across the EU, and gives an indication of the potential impact of Brexit being backed by voters.’

Grant Thornton global leader for tax services Francesca Lagerberg said: ‘While we’ve heard plenty about what firms in the UK think about the referendum, until now we’ve not really had a comprehensive measure of how counterparts on the continent feel about the issue. What's abundantly clear from our research is that European business leaders overwhelmingly view a Brexit as a negative development for the EU.

‘The referendum comes at a critical time for Europe. Confidence levels among its businesses are actually pretty strong when you consider the range of factors threatening to undermine it; low growth, high unemployment, the migrant crisis and a potential Brexit to name a few. However, any one of these flaring up over the next few months could see that optimism wobble if the economic shocks undermine business leaders’ ability to plan and invest.’

Grant Thornton also asked business leaders to name other factors which they feel pose the biggest threats to region’s economic stability. Within the eurozone, businesses highlighted low growth (25%) and high unemployment (19%) as main concerns, while issues such as deflation (13%) and migration to the EU (10%) were cited less often. In the UK, 29% of firms cited national debt as the biggest challenge to EU economic stability.

Despite these concerns, the IBR reflects good European business optimism, at net 31% in Q1 2016, which is higher than the global figure for the same period (26%).

Francesca added: ‘Thus far business leaders across Europe don’t appear to have let the whirlwind of threats to economic stability affect their outlook and optimism too dramatically. However, as we look ahead to the coming months, what’s clear is that there is the potential for those pressures to grow. In light of this, reviewing current operations and taking steps to build resilience could ensure that sentiment remains robust over the coming months.’

You can read the full report at http://www.grantthornton.global/en/insights/articles/the-future-of-europe-2016. 

Photo - Michael Crowe.