Impact of Brexit on Vodafone

This paper discusses the impact of Brexit on Vodafone and how it has affected the company's operations. It analyzes an article from The Financial Times and explores the issues of trade bloc, market disruption, and stock market access. The paper also applies theories such as absolute advantage and Leontief Paradox to understand the implications of Brexit. Governmental policies to prevent market disruption are also discussed.

Running head: IMPACT OF BREXIT ON VODAFONE
IMPACT OF BREXIT ON VODAFONE
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1IMPACT OF BREXIT ON VODAFONE
The aim of this paper is to discuss the iampct of Brexit on the company operation of
Vodafone and how this issue has manipulated the overall policies of the company in a
negative way. The article published in The Financial Times namely EU share trading plans
for no-deal Brexit riles UK watchdog by Philip Stafford in the last month will be detailed in
this paper (Ft.com 2019).
In this particular article there are three aspects have been pointed out. First is the
issues of trade bloc between the European Union and Britain. The second issues relates to the
market disruption as detailed by ESMA, an independent European Union authority that
contributes and safeguard the stabilities of the EU’s financial system through enhancing the
protection of the investors and promoting an orderly and stable financial market. The third
issue pointed out in this article is the cliff-edge effect in stock markets where the business
organizations of EU may not be able to access some of the stocks that are actively traded in
London.
According to this article, the European banks as well as asset managers are force to
trade some of the biggest business organizations like Vodafone, Royal Dutch Shell in the
European Union if the UK decisions to leave the bloc without any agreement within next few
weeks. The banks of the EU along with the fund managers are to be trading 14 of the largest
stocks of the UK in which Vodafone is one because there is liquidity in the share on the
European exchange (Ft.com 2019). ESMA as mentioned before, is the independent European
Union authority to and promote orderly and stable financial market, may caret market
disruption. As detailed in this particular article, the UK has been preparing to leave the EU
within the March end but the EU regulators are not ready to recognize the UK institutions lie
London Stock Exchange like other 27 countries in the trading bloc. In this respect it has been
found that one of the most important firms in this region, Vodafone will be moving its
headquarters from the Post Brexit United Kingdom. As the freedom of movement of the

2IMPACT OF BREXIT ON VODAFONE
people, goods and capital will face problem in this trade issues. According to the news
published in the 2016, when the Brexit decision was just introduced, since then, the company
aimed to focus on the growth of the company. At that point of time, the European business
produced 55% of the annual profits of the group. On the other hand this was 11% in the UK
(Whalley and Curwen 2018). The membership of Britain was still important for the growth of
the company in every aspects. Therefore, it needs the freedom of movement of the goods,
people and the capital having one single legal frameworks spanning all the member states. In
addition to this, the company wants them to capture the European single digital market as
well as the leading digital economy of the world of the UK.
The situation therefore, has become more problematic as the investors of the EU are
not being able to access the large stokes maintained by the UK anymore. This is a loss to the
investors as the market in the UK is deeper as well as their prices are more competitive.
However, the threat of market disruption due to the effect of Brexit is being tied to be
avoided. The lobby groups with are representing the EU investors, are pushing the watch
dogs for avoiding the disruption. However, all the UK stocks and EU stock listed are
expected to be exempt from regulations (Moloney 2018). ESMA stance aimed to avoid the
cliff edge effects in the stock markets.
Theories and models can be applied in the issues of Brexit to discuss it to have a long
term framework. In this respect it can be stated that Brexit is a two way process which
involves 27 members states to keep away from the decision making process of the EU
institutions during or after the process of Brexit. The free trade operations of the companies
are related with two most important theory named Laissez-faire approach and Leontief
Paradox. The first one includes absolute advantage theory and comparative advantage. In the
case of absolute advantage, the countries or regions produce greater quantity of products and
services than that of the competitors but both of those use same amount or kind of resources.

3IMPACT OF BREXIT ON VODAFONE
Free trade theory based on the absolute advantage theory brings specialization, natural
advantage, acquired advantage, greater efficiency and higher global output (Yueh 2017). On
the contrary the competitive advantage theory, provide advantage to one of the two
competitors. This principle is based on the idea that it can be advantageous for the two
countries doing business without any barrier as long as one of them is more efficient in
producing goods and services needed by other. In this particular case, the importance is not
on the absolute costs of the production but ion the relative proficiency with which the
countries can produce the products. In this case of Brexit, Britain had been operating
collectively with other European nations abut recently had decided to leave this collective
framework and follow the process of trade bloc.
On the other hand Leontief Paradox theory finds out that if a national has abundant
capital they must be an exporter of the capital intensive products. Perhaps this is the main
cause of Brexit where the UK was gaining full support for free trade, employment rights,
trade agreement availability and healthcare support but still left EU due to the inability to
operate in the non-representative institutions (Ft.com 2019). Despite getting competitive
advantage, the UK had not been above to sustain the immigration policy of the institution that
resulted in the loss of jobs of the local and inability to work in a lower wage. In addition to
this, economic burden was one of the main issues that led the UK to choose Brexit.
The governmental policies can be adopted to prevent this market disruption due to
Brexit. As the market disruption has been related to the political changes and political actions
in the nations or for that matter the countries connected economically or politically.
Therefore, the changes to the trades and tariffs on the imports closely connects to the
companies like Vodafone. There is a debate on the effectiveness of Brexit on the overall
economy and financial system of the connected countries in the UK or the other countries of
the European Union (Ang 2016). Some of the experts are reefing this particular decision by

4IMPACT OF BREXIT ON VODAFONE
the UK as the best one to save the employability and value of skills on the part of the UK.
One the other hand, the other experts are questioning the authorities of the EU as this will
create an economic upheaval on the European markets (Jones 2016). Therefore the
government can change policies and creates a scope for negotiation in keeping of the most
important countries, here the UK, so that the most lucrative market is not compromised.
This particular article has not ascribed with the Porter’s Diamond theory that relates
to the four conditions important to gain and maintain the competitive superiority. The factor
conditions that describes the positions of the nation in the factors of production like labor,
capital, technology, natural resources and entrepreneurship stock of the UK, the demand
conditions has not been detailed. This particular condition refers to the nature of the home
market demand for the specific products as well as services (Noyer 2017). In the case of
Vodafone, the problem lies in this factor that the demand condition has been increasing in
both the UK as well as the EU countries but if Brexit happens, it will be problematic for
Vodafone to overcome the trade barriers. In addition to this, the article has not referred top
the supporting industries affected in the Brexit issues related to Vodafone. There is a clusters
of competitors, suppliers and the complementary firms which directly connects to the growth
of Vodafone but in detailing the post Brexit situation, the article has not referred to these
supporting industries but only detailed the situation of the financers or the UK markets
regulator to trade the biggest stocks (Moloney 2017). Similarly, the article also did not talk
about the effect of the mercantilism and neo mercantilism theory so that the readers can
understand that the government intervention in the flow of trade can affect the maintenance
of the favorable balance of trade.
Therefore it can be concluded that this article has detailed the situation of the biggest
stocks of the UK such as Vodafone to be suffering negatively after Brexit. It will be shifting
its headquarters to avoid the blow of the unavailability of freedom of movement of capital,

5IMPACT OF BREXIT ON VODAFONE
people and other related elements. There are numerous theories that have helped to
understand the situation of Brexit and its effect on the company more effectively.
References:
Ang, R., 2016. Vodafone Global Telecommunications: Optimizing Operations. IUP Journal
of Operations Management, 15(4), p.46.
Ft.com (2019). EU share trading plans for no-deal Brexit riles UK watchdog | Financial
Times. [online] Ft.com. Available at: https://www.ft.com/content/94957edc-4a72-11e9-bbc9-
6917dce3dc62 [Accessed 15 Apr. 2019].
Hodge, N., 2016. Uncertainty abounds after Brexit vote. Risk Management, 63(6), p.4.
Jones, E., 2016. 7. Brexit: opportunity or peril for trade with developing countries?. The
impact of the UK's post-Brexit trade policy on development, p.30.
Moloney, N., 2017. Brexit, the EU and its investment banker: rethinking ‘equivalence’for the
EU capital market.
Moloney, N., 2018. Brexit and financial services:(yet) another re-ordering of institutional
governance for the EU financial system?. Common Market Law Review, 55(2), pp.175-201.
Noyer, C., 2017. Brexit means the end of single market access for London.
Whalley, J. and Curwen, P., 2018. Vodafone signals the demise of copper: A regular column
on the information industries. Digital Policy, Regulation and Governance, 20(3), pp.288-290.
Yueh, L., 2017. Britain's Economic Outlook after Brexit. Global Policy, 8, pp.54-61.