Bad news for entrepreneurs.
Yesterday, the United Kingdom voted to leave the European Union. It’s too early to determine the effects of this decision on Britain, but they’re probably going to be massive. Scotland has said it’s likely to hold another referendum on whether or not to stay in the U.K., and politicians in Northern Ireland have largely expressed concerns for the future.
What’s less obvious to many Torontonians is how Brexit will affect them.
The global economy has already had a decidedly negative reaction to the news, with markets all across the world plummeting. The Canadian dollar has dropped one cent against the U.S. dollar, and the TSX dropped 300 points today at open, recovering a little as the day has gone on.
While the TSX and global markets have had an immediate and visceral reaction to the Brexit vote, in Toronto, the people who will feel the negative effects are confined to a small slice of the population. “Toronto is home to many multinational companies that also have offices in the U.K.,” says Sui Sui, a professor at the Ted Rogers School of Management at Ryerson University.
Canadian multinational corporations and investment banks based in Toronto often do business in the U.K., specifically London, to break into the entire European market. How exactly the Brexit will affect these businesses remains unknown, but to keep a hold on the European market, Sui says it may be wiser to move to another country. “For large companies this will be costly uncertainty, and may affect their global performance,” she said.
On the other end of the spectrum, Toronto entrepreneurs looking to expand their businesses are also likely to be affected by Brexit. A good number of Toronto startups have ties with the U.K. and the EU, Sui says, and like the larger Toronto businesses, they too use the U.K. as a strategic point of entry into European markets. That strategic entry is predicated on EU free trade agreements, and the Brexit puts all of those agreements in jeopardy. “This is very bad news for entrepreneurs,” says Sui.
For Sui, the most dangerous fallout from the Brexit has more to do with cultural, not economic, change. Like the U.K., Toronto—and all of Canada—is a diverse place. A motivating factor for the Leave campaign revolved around the perception of immigrants taking jobs from Britons and draining social services.
That idea exists in Canada as well, and though the election of the Liberal government suggests that Canadians are friendlier to immigrants, the rise of Trump in the U.S. and Brexit may point to a future trend in Canadian politics.
The unexpected Brexit vote shows that understanding any political body is difficult, and Canada needs to be vigilant while looking for people who may stoking those fears. Torontonians know this kind of character all too well.
“It may not be now, it may be in the next few years, but we may have some candidate—someone like Trump—in the next election,” Sui says. This is really bad for Canadians, especially a city like Toronto.”