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Canon and Xerox on Brexit impacts

June 27, 2016

The after-effects of the UK’s decision to leave the EU include implications for both

Reuters reported on Canon CEO Fujio Mitarai’s views on the UK’s decision to leave the European Union last week, with the Canon executive “very dismayed” by the decision, which he believes could “halt Japan[‘s] recovery”. Mitarai added that he felt the move “hurt Japan’s economic growth prospects”, noting that “In Japan, while we can expect to see a temporary surge in the value of the yen, the UK’s decision could also bring a halt to the economic recovery that had been underway”.

He also noted that “we look to the Japanese government to implement strong monetary measures”, with Europe accounting for 28 percent of Canon’s sales in 2015 alone. Zacks also looked at the implications for Xerox, and how it would “survive the Brexit carnage”, noting that “various US companies from diverse sectors also felt the ripple effect”. It commented that even though the decision “is not legally binding and offers a likely two-year window for the entire process to be completed, it has certainly created a wave of uncertainty among investors”.

US firms in the UK “have a lot of exposure” to the UK market, which they are said to “use as a base to reach out to the larger continent”, and they are also said to “mostly prefer the UK cities […] for establishing a European footprint”. Around one-third of sales in Europe are made through UK counterparts, and the site names a range that could be affected including Ford and eBay, noting that “operating costs are likely to escalate as they restructure their resources”.

Xerox, the site commented, is in one of the sectors “expected to be the biggest casualties based on their revenue exposure to the UK” – information technology – and with Xerox seeing five percent of its total revenue coming from the UK, the site believes it will be a “high-profile victim of the Brexit fallout”. This is because it “has a significant number of manufacturing and engineering facilities in the UK”, alongside “high pension obligations”.

Its perspective is that Xerox, like other US firms that “import or export from the UK”, will “be stifled by the renegotiated deals and restrictions” that will arise, including “higher tariff and non-tariff barriers to trade”. With the OEM “grappling with slow demand in its printing business”, and its forthcoming split into two companies, the site concludes that its “fluid state” and restructuring will see Brexit become an “additional burden”.

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