Instability in the EU – Should I conduct business there?
With Brexit complications, market stagnation, Germany’s 2018 stumble, and austerity measures in multiple under-performing countries, the EU’s economic future is in question. So, is it currently too risky to expand into European markets?
The Butterfly Effect
The short answer is no. When it comes to expanding your business, this is a positive result. But, if you do want to start conducting business in the EU, you should be cautious. It might be assumed that the largest economics in the EU block are the healthiest. So, maybe you should target these? Germany is certainly a good example of this. Germany has both the largest and strongest economy in the EU, some might look at the country and be tempted to correlate size and strength, but it’s not quite that simple. The EU’s single market has integrated economies to an incredible degree and the health of one, or failure of another can determine the economic future of many. With the UK set to leave the EU, you can clearly see this effect. Let’s look at some of the top players.
The top three largest economies in the EU certainly do hold a lot of clout, but not everyone is performing. France, while at number 3, has been suffering from serious market stagnation. With the election of Macron back in 2017, many in France hoped his promises of policy change would provide the type of jolt the French economy needed. Unfortunately, unemployment remains high with the old, household spending has stalled, employment policies remain untouched and taxes are rising. Macrons future is now in question following his skirmish with protestors and it’s increasingly unlikely he will hold his position come election time in May.
A looming Brexit (of any description) hasn’t exactly instilled confidence in investors, but, British markets have hung on. After an initial downturn, the market has at least remained relatively stable. If a healthy, publicly-approved, soft-border Brexit is organized, the chances of recovery look good. At the moment, however, the UK looks as if it will leave without a deal in place. This has caused angst among businesses and many have already announced decisions to leave the UK or job cuts including Honda and Jaguar Land Rover. Not only that, the UK is poised to lose dozens of migrant workers who account for a significant percentage of the country’s heavy labor and industrial work.
With the 4th largest economy in Europe it may be difficult to understand why Italy remains entrenched in national debt and conflict with the European Commission. Unfortunately, it is largely the cause of political dissonance. With large camps unable to agree on what is best for the country, and unable to form a stable coalition government, taking targeted economic action has become all but impossible. Current hopes from the European Commission for a decrease in national debt and some tight austerity measures aren’t realistic. Prime minister Giuseppe Conte, while not intending to leave the EU, believes Italy should be left to solve its economic problems without European interference.
The golden market of Europe stumbled a bit last year. While Spain’s economy improved markedly, Germany’s usual steady growth was pushed back. Transportation problems in the industrial sectors decreased automotive sales, and ripples from the UK’s Brexit woes contributed to under-performance in 2018. While unemployment remains low, wages are rising, and markets remain relatively healthy, Angela Merkel’s upcoming retirement may spell an end to the political stability that has contributed to the EU’s economic success.
What does this mean for you?
These economical changes can have magnificent or catastrophic effects. If you’re thinking of conducting business in Europe, it’s important to do your due-diligence. Understand the business model of your customer, check out their website and social media, run a credit check, and safeguard your own company with specific sales contracts. Think about including a Retention of Title clause, a late payment clause, and an applicable legal jurisdiction clause. All of these we can help with. If you have a debtor in Europe or are considering expanding into Europe, get in touch today.
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