Trade, uncertainty biggest worries for Washington companies in wake of Brexit vote

Long-term, the British decision to exit the European Union is most likely to hit Spokane companies that are in the export business, local economists say. But uncertainty in the wake of the Thursday referendum vote has caused markets to plummet, leading to additional impacts.

“The main issue is the uncertainty that it creates,” said Grant Forsyth, the chief economist for Avista.

With the details of Britain’s exit still to be worked out, companies are likely to hold off on new investments in Europe “until there’s more clarity about the direction this is going to go and how smoothly and roughly this is going to go,” he said.

Thursday’s vote caused the pound to fall sharply against the dollar, meaning local businesses selling goods in Britain would earn less money. A stronger dollar could make life more difficult for local retailers, Washington Trust Bank chief investment officer Steve Scranton said.

“For any imports coming in from Europe or from the UK, that could put pressure on local retailers that have to compete,” Scranton said. But most of Spokane’s retail imports come from Asia, he said.

The United Kingdom is a big export market for U.S.-made aerospace products, with Washington being one of the biggest suppliers of those products. In the Spokane region, aircraft products and parts are the biggest export industry, according to Greater Spokane Inc.

But Tom Captain, who specializes in aerospace and defense markets at Deloitte Touche Tohmatsu Ltd., said Friday it’s too early to tell whether Britain’s exit from the European Union will affect that trade.

“The impacts will be forthcoming as trade agreements are renegotiated over the next three years, thus it is speculative to forecast the real impacts – other than market uncertainty creates a flight to safety, as evidenced by the current market turmoil,” he said via email.

Forsyth and Scranton said the exit means the Federal Reserve is unlikely to raise interest rates in the near future.

“For a lot of local businesses it just means … you’re still going to be in an ultra-low interest rate environment for longer than people expected,” Forsyth said.

Scranton said the drop in the stock market would likely reverse as investors get more clarity about next steps for the exit. Selling investments now would be a mistake, he said.

“It’s fairly typical to see a dramatic response from the financial markets when unexpected events happen,” he said.

The results of the Brexit vote also make the possibility of Donald Trump winning the presidency seem more likely for some economists, Scranton said. Many were surprised by the results of Thursday’s referendum.

“There could be a worry from businesses that globally there’s this whole nationalist, protectionist theme developing,” he said. “We still have 12 percent of our economy that is based on free trade, on exports. If there’s any move to say the U.S. is going to become more protectionist … businesses worry.”

Staff writer Addy Hatch contributed to this report.