In response to the referendum vote, the ASX All Ordinaries Index immediately fell and we now look to a period of uncertainty as Australia negotiates a Free Trade deal with the European Union in 2017.
However, Ben Wellings, lecturer in politics and international relations at Monash University, says one of Australia’s biggest trade partners will no longer be in the EU: 48 per cent of Australian exports in services to the EU in 2014 were via the UK and of the $169 billion in EU foreign direct investment, 51 per cent came from the UK.
There is no strong indication on whether the UK will welcome its own Free Trade agreement with Australia or what our access to the UK will look like. Wellings says our cultural ties mean we should be optimistic: “Expect these ties to be reinforced as the UK seeks trade agreements and political support from its ‘traditional allies’.”
“Expect these ties to be reinforced as the UK seeks trade agreements and political support from its ‘traditional allies’.”
Crucially for managers of people, the EU is Australia's largest services export market, valued at nearly $10 billion in 2014. It’s uncertain what attitude the United Kingdom will have to labour market mobility
given that since 2008 there’s been a 40 per cent drop in the number of Australians working in the UK.
However, Daniel Hannan, a British Conservative member of the European Parliament, told Fairfax Media, "One of the first things I would like to see after we've left is a free movement area with Australia and New Zealand.”
The exit from Europe was driven in some part by immigration fears and any tightening of work visas would make it harder for Australian companies to place people in the UK, or bring them here for employment.
The Brexit result is likely to create a general tightening of trade and mobility
between the countries, says economist, Saul Eslake.
“It doesn't seem to me that the kind of sentiments that prompted the majority of the British people to leave the European Union will allow any future British government to unilaterally dismantle what barriers still exist to the movement of Australian goods and services or people into the British market,” he told ABC News.
If there’s any good news for managers, it’s in the value of the Australian dollar against the British Pound. Immediately after the Brexit result the Australian dollar quickly strengthened against the Pound; if the trend continues it will make it easier for Australian employers to attract British talent.
The fallout from the Brexit vote on Australian businesses is likely to be a mix of positive and negative.