E.g., 08/19/2019
E.g., 08/19/2019

Brexit: Short-Term Boost, Long-Term Headache

By: Jesper Sandberg, Executive Chairman - Sandberg Translation Partners

27 July 2016

On 23 June, the United Kingdom voted in a referendum on whether to leave or stay in the European Union. The electorate voted in favor of leaving by a margin of 51.9% to 48.1%. Brexit ahead!

That narrow margin covers huge variations in geographical and sociodemographic factors. Print and online media have been awash with expert opinion on the circumstances of the referendum and the consequences of the outcome; from the macroeconomic level down to the industry-specific and even the personal level.

In terms of translation industry commentary, Common Sense Advisory took a global and very high-level perspective. We at STP contributed some of our UK perspectives in a Slator article, but I also thought that a very personal angle might make for interesting reading.

Before the referendum I wrote in a LinkedIn post about some of the reasons why I was in favor of the UK staying in the EU. These were mainly:

  1. out of “political principle”
  2. because I believed that in the medium to long term the UK as a whole would be better off in the EU than out of it
  3. I would have preferred medium- to long-term stability in the business environment that my company operates in rather than the possibility of (short-term) financial gain from exchange rate fluctuations

I’m sure everyone knew that the most likely immediate impact on some people and businesses in the UK was that pound sterling would lose a lot of value. And so it did:

 

22 June

19 July

% difference

GBP 1 : EUR

1.3017

1.1900

9.3865%

GBP 1 : USD

1.4680

1.3130

11.8050%

 

My company is based in the UK, but we have around 20% of our salaried staff who are paid in currencies other than pound sterling (GBP) because they live outside the UK. The weakened pound caused our payroll costs to increase to the extent that, viewed in isolation, our annual taxable net profit would have dropped by around 26%. That would have been difficult to stomach, and I would have felt pretty hard done by.

However, due to the particular circumstances of our business, the net result for the company as a whole is that the weaker pound now looks set to increase our annual taxable net profit by as much as 75% (assuming that exchange rates stay roughly where they are now, and with all other factors unchanged). The reason why we benefit is because we export around 85% of our sales to clients throughout the rest of the world, whereas a fairly high proportion of our linguistic production work is carried out in the UK.

If I had worked on the numbers before the referendum and had quantified the likely financial benefit of Brexit, would I instead have wanted the UK to leave the EU? Would I have put personal gain above what I believe to be for the greater good of the UK?

Thankfully I don’t have to challenge my morals and convictions over that now. I’ve just been lucky in the short term. However, I still fully expect a wide range of drawbacks from Brexit to gradually start affecting both my personal finances and my company’s finances and operations.

In stark contrast to my own company’s fortuitous circumstances, I have recently had conversations with owners of a few UK LSPs for whom Brexit is already becoming a major challenge. This is typically because they are in exactly the opposite situation to my company, i.e. most of their clients are in the UK and they primarily buy their translations from suppliers outside the UK. They have virtually no choice but to increase their UK selling prices and/or start thinking really creatively about how else they can compete and stay profitable.

It’s still in the early days for the UK’s Brexit. As much as I’d like to have this information, I really can’t predict how it will all pan out over the next 2-5-10 years for LSPs, for the UK, for the EU, or for the global markets.

One thing is certain: it is going to be an interesting journey. Here’s wishing good luck to us all!

Jesper Sandberg

My professional experience goes back to 1990, since when I have worked as a...
- Translator
- Localizer
- Project manager
- Business manager
- Translation industry consultant
- Managing director

 As STP's Executive Chairman I focus on...
- Running our board of advisors (to be appointed in 2016)
- M&A, joint venture pursuits and relations
- Compensation practices
- Management development
- Strategic planning
- High-level finances and funding
- High-level IT
- Sales, marketing & branding

I currently serve as...
- Vice-chairman of the Association of Translation Companies in the UK
- Chairman of the Board of Directors of GALA

In both roles I enjoy the privilege and challenge of working with highly skilled and committed translation industry professionals to enhance and strengthen the role of translators, translation companies and the associations representing them.