While the U.S. has been focused on the presidential primaries, European leaders gathered in Brussels in February for the EU Summit spent two days in tough negotiations with British PM David Cameron granting the UK certain concessions in an effort to prevent the UK from exiting the EU, popularly known as “Brexit.” Following Mr. Cameron’s election promise in 2013, he has now announced that British voters will decide by referendum, scheduled for June 23 of this year, whether or not the UK will remain in the EU. The announcement of the date over this past weekend has kicked of a spirited campaign in which Mr. Cameron supports remaining part of the EU, but 5 of his ministers as well as the popular London mayor have already announced that they will vote “Leave.” The European migrant crisis is further fueling the debate.Mr. Cameron is expected to spend the next few months defending the reform concessions he was able to achieve in Brussels – namely reductions in social services to migrants and suspension of the free movement of people, as well as certain structural reforms within the EU. The UK had never been quite comfortable with the notion of an “ever closer European Union,” and thus remained outside of the Eurozone and Schengen agreements.Economists and politicians will now spend the next few months laying out competing scenarios of whether the UK outside of the EU will be better off, the same or worse off than before. Proponents of “Leave” claim that the UK could negotiate agreements with the EU – similar to Switzerland and Norway – that would guarantee many of the economic free trade benefits without the bureaucratic burdens and perceived intrusion on UK sovereignty. Opponents warn that the uncertainty and difficulty of establishing the necessary free trade relationships in a timely fashion could bring disastrous consequences for the UK economy.Fellow EU member states Germany and France have a strong interest in keeping the UK within the fold. Not only do they fear that the exit of such an important member (13% of EU citizens and 17% of economic activity) could bring the European experiment to its knees. They also realize that without the UK, the EU would be weakened politically and find it more difficult to go toe to toe internationally with strong powers like the U.S., China and Russia. German Chancellor Angela Merkel warned that the “benefits of the UK remaining in the EU are much greater than the disadvantages of an exit would be.”The U.S. business community is well advised to watch the Brexit developments very closely and plan accordingly. The financial sector in particular, but also many other U.S. businesses that have established their European headquarters in the UK, currently benefit tremendously from the UK’s membership in the EU. The current status guarantees the free movement of capital, goods, services and people within the EU. Uncertainty surrounding this status and the potential loss of these four freedoms could significantly impact the attractiveness of the UK for American multinationals as a location for doing business. Businesses counting on the UK as a culturally similar and convenient entry point as well as a bridge into Europe should carefully consider upcoming investments or strategic decisions that could be negatively impacted by a “Brexit.”

John P. Schmitz

For 25 years, John has been the go-to political problem solver for leading U.S. companies facing legal and regulatory challenges in Berlin and Brussels. He has a deep working knowledge of all three branches of U.S. government, and private practice, particularly focusing on antitrust, media, energy, and environmental issues, and has represented U.S. and European companies on complex cross-border transactions in politically sensitive sectors. John is a leader of Prime Policy Transatlantic Group.

Martina Simpkins

Educated as a lawyer in both her native Germany and in the United States, Martina provides strategic, legal and policy advice to corporate clients with a special focus on the transatlantic relationship, and in particular Germany. She has extensive experience covering energy, climate and natural resources, pharmaceuticals, media/high tech, international trade, and foreign investment. She often works with diverse stakeholders and coalitions to help clients build consensus around policy challenges and help shape the outcome of international negotiations, as well as regulatory and legislative processes.