How a small diaper company explains Brexit

Owner Guy Schanschieff was among the more than 17 million Brits who voted to leave the European Union late last month, setting in motion an historic regime shift that is upending the nation's political leadership and unraveling its long-standing alliance with its continental neighbors.

Analysts have warned that the Brexit will wreck economic havoc. But Schanschieff sees opportunity instead, a chance for the company he and his wife founded two decades ago to escape the EU's rigid trade rules and sell diapers to parents in any nation in the world.

"It is certainly those countries outside the European Union where we have the greatest opportunity," he said. "It's about looking globally, rather than the very European thing of looking very inward."

Business owners like Schanschieff played a central role in the effort to abandon the EU, venting populist frustration over restrictions and red tape emanating from the institution's seat of power in Brussels.

Now they are heralding Brexit as the first step in removing burdensome regulations that have stifled innovation and growth and see new opportunities to strike favorable trade deals, not just with Europe but with fast-growing emerging markets across the world.

To them, the country is not careening toward recession but building a new economic order that puts British interests first.

"We now have to do everything we can to make the U.K. the most attractive place in the world to do business," said George Osborne, the chancellor of the exchequer, as he kicked off a visit to New York last week to meet with investors. "Britain maybe leaving the EU, but we are not quitting the world."

Yet Brexit has deeply divided the country, and many remain pessimistic about its outcome. Osborne had warned of painful tax hikes before the referendum, though he has since pledged to cut corporate rates to encourage businesses to stay in Britain. This week, he is slated to visit China and Singapore to assuage investor anxiety.

"There is little doubt that the U.K. referendum vote in favor of leaving the EU, will take a significant toll on the economy," concluded a report by Fitch Ratings, which downgraded the country's credit rating.

And if trade with the rest of Europe is stunted, the biggest impact could be on places like Northampton, a midsize town about 90 minutes north of London that once was the manufacturing hub for England's shoes, churning out millions of pairs of boots for soldiers during World War I.

Now, a quarter of workers are employed in manufacturing, construction or transportation. Research by the Centre for European Reform, which opposed Brexit, found Northampton and the surrounding county were among those most dependent on the EU.

Yet an overwhelming 59 percent of voters here backed Brexit. Local politician Andrea Leadsom, who was vocal about the benefits of leaving, was a top contender for prime minister.

From the cramped warehouse offices of Bambino Mio, business looks brisk. The company sells its whimsically patterned diapers in each of the 27 other countries in the alliance, Schanschieff said. It sources fabric from Poland, manufactures baby swim diapers in Lithuania, and ships crib mattress protectors from Spain. Clocks on the wall at the company's headquarters display the time for Hong Kong, San Francisco, New York and Berlin.

Leaving the EU could mean giving up access to the common market that allows Bambino Mio to move his products among member nations without paying taxes. But Schanschieff said the company's sales growth in Europe is leveling off. He would like to establish a foothold in South America but said that, under current EU rules, tariffs on his products would be so high that he could not sell them at a reasonable price. The EU has not negotiated a new trade agreement in 40 years.

"Effectively, the EU has become an area to protect their own trade," he said, "but in the process it's not allowing companies like ours to get the possible deals outside the EU with countries that are actually growing and developing."

Membership in the alliance also requires businesses to comply with a centralized regulatory system that many feel is heavy-handed and run by remote bureaucrats. In the northwest of England, another stronghold of support for Brexit, Oliver Barton and his father make sticky toffee pudding by the hundreds every week to sell in local shops. There are three flavors - orange and cointreau, ginger and original - and each requires a 23-page assessment of potential hazards during cooking, such as paint chipping off the ceiling and falling into the batter. Barton said he spent about 800 pounds ($1,031) to complete the forms.

"The establishment in the country as a whole has just thrown its toys out of the pram and is having a temper tantrum," Barton said. "I think there are a lot of people in this country that need to accept democracy, accept the will of the people and make the most of what has been presented."

Britain has yet to formally declare it is leaving the EU, a task that will fall to the new prime minister Theresa May, who took the reins on Wednesday. The country would then have two years to negotiate the terms of its departure, though some officials estimate it could take six. And it remains unclear exactly what the split will look like.

Severing ties to Europe's common market could also mean ending the free movement of people that has been one of the core principles of the alliance. Membership allows residents of any country to live and work in another without complicated paperwork, and the issue has turned an ostensibly economic debate into an emotional battle over immigration.

Britain's relatively strong economy has drawn a steady stream of immigrants from poorer countries. Northampton has been home to a sizable Polish community since World War II but more recently has seen an influx not only of workers from Europe, but also from Bangladesh, Africa and the Middle East. At the farmer's market in the heart of town, Carl Wood said immigrants make up roughly 80 percent of the customers that stop by his stall to buy peaches, cherries and other fruits and vegetables.

"If you take all the foreigners out of this town, I'd be gone," he said while packing up empty crates at the end of the day.

But at his diaper company, Schanschieff said that risk is remote. Paperwork won't prevent him from hiring EU nationals, he said, and he denounced strains of racism that have tainted support for Brexit among the hard-right political parties. He also expressed frustration that government leaders have yet to outline a path forward.

"There was no plan for exit," he said.

But some of the worst-case scenarios have not yet materialized. After initial losses, London's major stock index is now higher than it was before the referendum. Banks throughout Europe have been shaken, but they have not fallen.

"It will be positive. It's just getting over this stage," Schanschieff said.