Suburban companies with ties to Britain face changes, uncertainty
Pillarhouse USA Inc. has been doing business in Elk Grove Village since 1994. But it wasn't until Friday that the chance to take advantage of a dropping British pound looked enticing, all while Great Britain's economic future looked uncertain.
The economic uncertainty was the result of Britons voting Thursday to leave the European Union after more than 40 years. Since Pillarhouse's global headquarters is in Chelmsford Essex, England, the vote's impact hit close to home and rippled to the suburbs.
"There's been a drop in the pound, so that will have an affect on how we import machinery from England to here, but that's just a short-term positive," said Jonathan Wol, president of Pillarhouse USA. "The exchange, over a longer period, of pounds to dollars can make importing to the U.S. better. ... But otherwise, the market doesn't' like uncertainty and this causes uncertainty."
While the United Kingdom prepares to exit the EU and stock markets plummeted worldwide, suburban companies like Pillarhouse USA said Friday they will closely watch the developments and how they affect the exchange rate and their business offices there. There are about 200 Chicago and suburban companies with operations in the United Kingdom. Others are based there but with offices in the local suburbs, according to statistics from World Business Chicago.
All those British ties have led to billions of dollars for Illinois. The United Kingdom had total imports to Illinois of about $1.9 billion in 2015, which included engines, turbines, iron and steel, medical instruments, pharmaceuticals, chemicals, spirits and other products. On the other hand, Illinois exported to Britain products valued at about $1.7 billion in 2015. according to World Business Chicago.
While the exchange rate and the stock markets have quickly reacted, the total economic impact of Britain's actions won't be known for years. It will likely take about two years just to negotiate a new trade agreement between Britain and the United States, experts said.
London-based BP, which has offices in Naperville and Chicago, said in a statement that while it's too early to understand the implications of the referendum, it doesn't expect it to have a significant impact.
"As details of the process for negotiations around the UK's future relationship with the EU become clear, we expect to engage with both the UK government and the EU on areas of common interest," the BP statement said.
Elgin native Andre Fiebig, an attorney with Quarles & Brady, said local companies need to monitor changes in currency exchanges closely. They might consider changing contracts to be paid in U.S. dollars instead of pounds, or hedge, meaning they could lock a rate in U.S. dollars. They also should look at their British operations and see if it would be beneficial to move to continental Europe and be closer to their customers.
In any case, the EU doesn't have any rules in place on what happens between now and when Britain officially exits and new trade agreements go into effect. That means many local companies need to closely watch what happens and how it could affect them, Fiebig said.
"It's just a blank box now on how things play out," Fiebig said.