For Britain's bosses, "Brexit" is small beer compared to the concerns emanating from emerging markets.
It's not hard to see why.
In terms of revenue, top U.K. companies are more exposed to emerging markets than they are to Europe. Some 28 percent of the FTSE 100's revenues come from emerging markets, according to data from index provider MSCI, versus 15.5 percent from the European Union.
Even though the EU is by far the U.K.'s biggest trading partner, the fact remains that plenty of British brands such as Burberry or Unilever depend increasingly on the developing world to expand. A 2016 survey by PwC found that U.K. CEOs rank China as a greater source of growth than Germany over the next 12 months. How the crisis in emerging markets unfolds is therefore crucial for profit at British firms.
While once investment flowed into China and Latin America on a wave of cheap debt, rising oil prices and peppy economic growth, those conditions have unwound dramatically, sending financial markets into a tailspin and forcing central banks to keep their economies on life support for far longer than expected.
The economic picture for developing countries is mixed. China is still expected to grow 6.3 percent in 2016 and 6 percent in 2017 and India 7.5 percent in both years, though Brazil will shrink 3.5 percent before flatlining, according to the International Monetary Fund. The EU's 1.7 percent prospect for both years still looks paltry by comparison. Whether to cut losses from battered emerging-market investments or to bet on a rebound -- PIMCO labelled the assets the "trade of a decade" -- is an urgent question for CEOs.
The money has also flowed back the other way. Middle-East investors own stakes in Barclays, high-end hotels, Canary Wharf offices and supermarket chain Sainsbury's, while the Chinese have spread their wealth through a range of projects including Weetabix cereal and nuclear power plants. Domestic worries are pushing Chinese companies to invest abroad, though a further deterioration in the economy at home could jeopardize that dynamic. So for British companies trying to sell assets, strike deals or find partnerships, the outlook for emerging markets is key.
There are so many unknowns and variables linked to Brexit that some companies see it as a distraction for management rather than a risk that can be managed or planned for. Trying to predict the impact of Brexit beyond a day-one hit to the pound and a long period of trade renegotiation is nearly impossible, with a seemingly endless range of political and economic outcomes. Asset manager BlackRock reckons that after a vote for "Brexit" the earliest possible date for formal separation, given the need to negotiate the arrangements for withdrawal, would be June 2018 -- leaving plenty of time for other kinds of surprises to undermine the outlook.
The challenges facing China and emerging markets look a lot more potent and immediate. While Chancellor of the Exchequer George Osborne says the referendum is the biggest question facing the U.K. in 50 years, it's not the only game in town for British bosses.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
The analysis covers 261 audio transcripts of conference calls for earnings reports of FTSE 100 companies. Of these, 16 mentioned Brexit, and 70 contained the phrase "emerging markets." There were multiple mentions of each in some transcripts.
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