June 29, 2016

‘Not Dead Yet,’ Britain Insists

SMITH BRAIN TRUST — Reports of Britain’s death are greatly exaggerated. Albert “Pete” Kyle, a finance professor at the University of Maryland’s Robert H. Smith School of Business,  says foreign investment might even increase following the United Kingdom’s vote to withdraw from the European Union.

“It’s not clear a huge amount of economic dislocation will result,” he says. "A weaker pound and weaker euro would make exports more competitive and make housing in the UK cheaper, and that would attract — not deter — foreign investors. And the lower interest rates we’ve been having, with bond prices rising, will tend to stimulate growth.”

Kyle points to other signs of life from Britain, including obstacles to European Union retaliation. “It would make the EU look like a prison — with German Chancellor Angela Merkel the guard and barbed wire surrounding the remaining countries,” Kyle says. This image, if seared in European minds, could accelerate pro-exit movements in other EU countries. “The EU should feel compelled to pursue a strategy of accommodation through such areas as labor movement, passport controls and visas,” Kyle says.

Even if the EU pursues a strategy of accommodation, negotiations with the UK could still be tricky. “Britain eventually could make it harder for people entering the UK to get work permits,” Kyle says. To best capitalize in this area, he says the UK should accommodate work permits for people coming in to the country to work in heavier-taxed, high-end jobs, while restricting the number of work permits for low-wage jobs. “There are plenty of depressed parts of the UK where there’s slack in the labor market — so there’s a need to create a mechanism to get people (already there) to fill existing openings,” he says.

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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

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