Dividends and UK CEOs step up warnings about a non-deal Brexit

In England, when the month turns to April the date will change and technically the United Kingdom will be out of the European Common Market or the Brexit will be in force. There are proponents on both sides and for the most part, the average person believes no much will change. There will be a truth to the matter, but what will change is investment decisions. In an article in late January Paul Waldie reported on discussions with business leaders. Part of the job of the leader is to allocate resources in the future.

In North America the people at GM recently announced closure of 14 auto plants to better position the company. If GM will do that in its backyard, what do you think manufacturing companies are thinking. For example, Airbus is owned by the Europeans with headquarters in France. Due to the ownership, there are plants and sourcing for aircraft parts across Europe. In England, Airbus CEO Tom Enders noted on its website if there is no deal, different allocation of resources will take place. He said please do not listen to the no side, although we have huge plants, they will not always be there.

Sony has decided to move its European headquarters from London to Amsterdam; freight company P&O announced plans to shift registration of its 6 English Channel ferries from UK to Cyprus in order to keep its financial operations inside the EU. In April, Honda, Jaguar Land Rover, and Ford will shut down for 3 weeks to evaluate what is happening or how the rules have changed. In an survey about manufacturers, most said they will spend less money on investments as they wait and see.

The issue is no one really knows what they want or do no want, except something will happen in April.

Linking to dividend paying stocks, most of these companies tend to love stability in the on going operations of the company. Yes they plan for some disruption but relative to the whole operations the disruption is a small point. With Brexit, given the strength of London for so many years, many companies have operations in England. Do they change, what are the advantages? disadvantages? If some of your investments have operations in Europe ask what are they doing about Brexit?

There are more questions than answers, till the next time – to raising questions.

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