Peter Terium, the CEO of German energy company RWE, is worried about the consequences of Great Britain’s decision to turn its back on the European Union.
On a political level, he fears that other E.U. member states could follow the British example, and he sees Europeans’ influence on the rest of the world shrinking.
When it comes to business, Great Britain is an important market for the Essen-based energy company. Since 2002, RWE has operated its own distribution business in Great Britain under the npower brand, one of the six leading energy providers there. Npower supplies electricity to about 3.2 million customers and natural gas to 2 million customers, employing about 9,200 people.
Despite his concerns, Mr. Terium remains optimistic about the effects of the Britons’ vote to leave on RWE.
Handelsblatt: Mr. Terium, what went through your head when you heard about the outcome of the Brexit referendum on Friday morning?
Mr. Terium: I am shocked that British voters decided to leave the European Union. With the British, we are losing an important pillar of the European house, and that is dangerous for the entire structure, especially as other member states could now follow the British example. This puts the entire European project in jeopardy, a project that provided peace and growing prosperity for 70 years.
A step like this sends the message that there is internal discord among Europeans.
How do you think the decision will affect Great Britain, in both political and economic terms?
My fear is that Great Britain will be weakened by the Brexit. Its foreign policy will be weakened, because Great Britain alone is too small to carry the same weight internationally as it has until now. Economically speaking, the Brexit creates a high degree of investment anxiety in the short term. In the medium to long term, lower productivity, due to reduced foreign direct investment and British companies shifting production to the European Union, is a likely consequence of leaving the European Union. This will likely curb British growth.
And what consequences will the Brexit have for the European Union?
In political and foreign policy terms, Great Britain’s withdrawal will have noticeable effects in international relations and will weaken the role of the European Union. A step like this sends the message that there is internal discord among Europeans. This reduces their political influence on the rest of the world on security issues, and in fundamental questions of economic cooperation and climate protection. We can also expect to see a structural shift within the European Union. With Great Britain, the European Union loses one of the most important supporters of the market economy, self-reliance and competition. In economic terms, Great Britain is one of the biggest net contributors in the European Union.
And that means?
The Brexit creates a funding gap in the billions for the E.U. budget. Closing this gap is likely to amplify discontent with the European Union among the largest contributors, especially here in Germany. Britain’s withdrawal also requires a complete restructuring of trade relations between Great Britain and the European Union, and especially Germany as Britain’s most important trading partner. The complication and slow-down of the exchange of goods would be the direct consequences. It is hard to imagine that this will have no negative impact on economic performance and employment, especially in Great Britain, but also in the European Union.
How does the vote affect your business?
The saying “all business is local” is especially true of the business of energy and energy services. Trade hurdles would only be affected in a marginal way. The effects on national regulation and local acceptance are often much more critical to our business success. This is why the economic impact of a Brexit on our business should be relatively manageable. The same applies to possible effects on the pound-to-euro exchange rate, where the contrary influences on our U.K. operating results and debt in British pounds should more or less cancel each other out. But it’s still too early to assess the details.
You believe that other countries could now also hold referendums on leaving the European Union. What would be the consequences?
This is certainly conceivable, and it makes me concerned about the future of Europe and the European Union. Beyond the daily discussions on who pays how much as net contributors to the European Union, Europe should be considered in the overall context. For instance, if we look at Germany and Great Britain alone, they make up less than 5 percent of the world economy. The euro area, on the other hand, is responsible for 15 percent and the European Union as a whole about 20 percent of global economic output. In the age of globalization of the economy and financial markets, and the formation of economic blocs around the world, Europe needs a strong, shared economic zone to preserve it global market shares and its competitiveness, and therefore its level of prosperity, as well.
This interview was conducted by Jürgen Flauger, who covers the energy market, and Kirsten Ludowig, deputy editor of Handelsblatt’s companies and markets section. To contact the authors: firstname.lastname@example.org and email@example.com