Despite some initial shock, the United Kingdom’s decision to exit the European Union is not expected to have a major impact on the boating business, say several industry stakeholders. Although a struggling British pound could create an even more favorable market for British builders that export to the United States, many executives seem to think the effects will dissipate quickly.
“The only potential impact I could foresee is that if the British pound continues to weaken, it will make U.S.-built boats more expensive to Brits and British-built boats more price-competitive to U.S. consumers,” says National Marine Manufacturers Association president Thom Dammrich. “My guess is this will stabilize shortly.”
Major British boatbuilders had little to say. Sunseeker declined to comment on the referendum, saying it was not going to issue a formal statement. Princess also didn’t respond to a request for comment.
“Those that import from the U.K. will see their dollar go further in buying U.K. goods, whether they are parts and accessories or consumers buying boats,” says Eric Braitmayer, CEO of Imtra, the Massachusetts-based consumer marine products manufacturer and importer.
That could be bad news for U.S. boatbuilders, who have been seeing an influx of products from abroad in the U.S. market for the past several years — in part because it’s the most robust market for new-boat sales, and also because of the strong U.S. dollar, which makes exchange rates more favorable for overseas builders.
“We expect much of this [currency fluctuation] is based on the surprise decision, so the impact may not be lasting,” Braitmayer says. “We have seen the euro drop a bit against the U.S. dollar, but less so than we might have expected for such a shake-up. Our biggest concern from the Brexit is the impact on the psychology of buyers in the marine market.”
Those concerns, however, seem to have been alleviated somewhat by the rapid recovery of the stock markets from their initial Brexit plunge.
MarineMax CFO Mike McLamb says that if the weekend immediately after the British vote was any indication, American consumers are undeterred. “We had a nice weekend of selling boats,” McLamb says. “Certainly there will be a period of uncertainty and choppiness in the near future in global markets, but I don’t think it’s going to have much impact on U.S. business.”
Central Florida has a large number of British tourists, but for Joe Lewis at the Mount Dora Boating Center, the impact should be minimal. “It’s not a big percentage of our business, so I’m not overly concerned,” Lewis says. “But I can see how it’s an issue, especially if the pound is worth a third less.”
“It is too early to fully understand the eventual impact and implications of the approval of Britain’s advisory referendum to secede from the European Union,” says Brunswick Corp. spokesman Dan Kubera. “The immediate effect of the Brexit vote has been to increase volatility and inject uncertainty into global markets as we all try to assess when and how this exit process will unfold. Brunswick will continue to monitor developments in relation to Brexit and are confident that we are positioned to navigate the consequences of the vote.”
Other sectors reacted less favorably to the U.K.’s decision to leave the EU. Ford says it will weigh employment at its U.K. plants to determine whether layoffs will be needed. The British pound hit a 31-year low against the U.S. dollar shortly after the vote, and Britain saw its credit downgraded. Banking shares suffered the most amid fears of a U.K. recession, with the Royal Bank of Scotland plunging by 25 percent at one point, according to The Guardian. Several stocks that dropped rebounded the week after.
But with Britain’s political situation in flux and its exit negotiations with the EU likely to drag on for years, analysts expect further declines for the pound, the Wall Street Journal reported. The U.K. currency is also vulnerable because of the country’s large current-account deficit and an expectation that foreign investment will fall. “I wouldn’t put too much weight on this move — we’re in uncharted territory now,” ING Bank chief international economist Rob Carnell told the Journal.
The Brexit vote did bring major change on the British political front. Prime Minister David Cameron, who had argued strongly for the U.K. to remain in the European Union, resigned immediately after the referendum. He was succeeded in mid-July by Home Secretary Theresa May.
The Brexit shock created a type of “economic post-traumatic stress disorder” for households and businesses, according to Bank of England governor Mark Carney. “It now seems plausible that uncertainty could remain elevated for some time,” Carney said in a televised address announcing the possibility that British interest rates will be cut.
French president François Hollande stepped up the pressure on the U.K. over its timetable for leaving the EU, insisting that Brexit cannot be canceled or delayed and that Britain will have to live with the consequences, according to The Guardian.
“The decision has been taken; it cannot be delayed, and it cannot be canceled. Now [the British] have to face the consequences,” Hollande told reporters, according to the newspaper. “Being in the European Union has advantages. And that’s … what the British are starting to understand,” he added, alluding to voters who opted to leave but have since expressed regrets. “Those who were tempted by the Brexit are starting to think it over.”
May has said she prefers to wait until the end of the year to begin an exit, but other EU dignitaries have been pressuring U.K. officials to clarify their intentions quickly so uncertainty does not linger.
The day of the Brexit vote, Markit coincidentally reported that Eurozone manufacturing activity rose to its highest level this year, according to a report by National Association of Manufacturers analyst Chad Moutray. Much of the improvement came from stronger demand and production in Germany, which expanded at its fastest rate since February 2014.
Yet Moutray said there also were signs that Brexit uncertainties and global headwinds had weighed on sentiment. Along those lines, the Markit Flash Eurozone Composite PMI, which includes services, declined to its lowest point since January 2015. In addition, growth in Europe has not been uniform, with France contracting for the fourth straight month.
This article originally appeared in the August 2016 issue.