Where most people see disaster, smart investors see opportunity. That’s what several companies see in the wake of Great Britain’s decision to leave the European Union. While most investors are actively running away from anything related to the British economy, Amazon has lead the charge, doubling down on the nation.
The internet giant pledged to create another 3,500 jobs in Great Britain. The company plans to continue this investment, developing a variety of business functions. They are expanding British operations in customer service, distribution, and management. They also plan to launch new services, including a fashion photography studio and expanded web services for a British audience.
In addition to fulfilling these promises, Amazon announced plans for a new distribution center in Doncaster, England to be completed in 2017. The center will create 500 new jobs in the country. This will be the second distribution center Amazon will open in England, following another center in Tillbury.
Amazon is banking on the increasing demand in Great Britain for online goods, as well as the network of small businesses in the country seeking a worldwide audience for goods. The infrastructure investment should help the internet giant deliver more goods to more places, faster.
Amazon is not the only company looking for a chance to capitalize on the Brexit vote aftermath. Pharmaceutical company GlaxoSmithKline is investing $361 million for 3 new production facilities in the country. Under a deal with the government of the UK, GlaxoSmithKline is allowed to rebate 50% of its taxes for patented inventions.
Both Amazon and GlaxoSmithKline seem to be taking advantage of an opportunity. The pound has been seriously devalued thanks to investor concerns over the future of UK-EU relations. This means it’s cheaper than ever to build in the UK. Over the long term, the UK economy will rebound and relations with the rest of the continent will normalize. When that happens, both companies will be well-positioned to take advantage of the new-found affluence of the UK.
In classical economic parlance, the UK has to take its “classical medicine.” A depressed currency value makes it difficult for the people who live there to buy things, but it makes it very easy for outside parties to invest. The lower currency value drives down the price of exports until the country is able to trade itself out of its currency hole. The combination of a positive balance of trade and an influx of foreign direct investment is the traditional answer to a country with currency problems.
It’s the iron-clad rule of investing on an international scale. Amazon and GlaxoSmithKline are buying low, with the expectation of selling high later. These companies have the benefit of being able to wait years to see returns on their investment, but that patience will be rewarded.