"Brexit", is a blend of words British and Exit and was coined by Peter Wilding. The Oxford English Dictionary in 2016 added Brexit to its volumes and awarded the honour of coining the term to Mr. Wilding. It is believed that the term Brexit was coined on the pattern of Grexit- a term for withdrawal of Greece from the eurozone. Brexit is now used worldwide to refer to the United Kingdom's (UK) official withdrawal from the European Union (EU).
On 23 June 2016, a referendum was held in the UK where 17.4 million people voted in favour of Brexit. Even after almost three years of the referendum, the UK has not officially left the EU because the Members of Parliament are yet to make a decision with regards to the Brexit deal. The EU has now agreed to further extend the deadline for Brexit until 31 January 2020. If the UK leaves, it would be the first member state to withdraw from the EU.
Impact of Brexit
It is believed that the UK's exit from EU will among other things have a significant, negative impact on many businesses around the globe, regardless of the sector they operate in, even if these businesses do not operate in the UK or even in Europe. It is believed that every functioning industry will be affected by Brexit and will face different challenges; some industries will be affected more than others. For instance, Brexit will bring real risks of increased costs and delay to supply chains, and there will be several changes in the customs laws. How Brexit will affect business will be different across the board. Prof Ashish Arora, Duke University, states, "The interesting question is who will make money out of a Brexit. Brexit is bad for business. Even firms not in the UK or Europe will feel the pain because value chains are globally integrated. On the demand side, EU growth will be slower, which will hurt as well."
As UK is yet to decide on their exit from EU, countries around the world are evaluating how Brexit will affect their interests. As a result of Brexit UK's trade policy are likely to change. This change could have dramatic consequences for some developing countries. While the UAE's economy may be protected by shockwaves created by Brexit, some impacts are likely to be still felt in the medium to longer-term, with some sectors benefiting and others being put at a disadvantage.
The UAE and the UK have had a long-standing peaceful relationship, which extends to their trading relationship as well. Owing to their long-time trading partnership, the UAE is one of UK's largest export market in the Middle East.
However, in the UAE, there is a consensus among economists that any adverse effects of the Brexit on the UAE business will be short-lived and that the UAE economy would escape unscathed. This is because the UK has time and again shown a keen interest in maintaining the most robust possible trading relationship with the UAE after the UK leaves the EU. A spokesperson for the UK's Department for International Trade (DIT) in a statement also stated that the UAE is a vital global trading partner for the UK.
The UAE is among the top markets for UK food and drinks globally, and the UK has been working with the UAE to ensure British companies gain an understanding of the UAE food market to encourage more products to enter the market. The DIT also highlighted that the UK-GCC Trade Working Group was announced in December 2016 to essentially examine how the two regions can best seek to deepen the trade relationship post-Brexit. This includes exploring non-tariff measures, such as regulatory barriers to market access, which could help facilitate free-flowing trade. The UAE would see the most significant gain, with predicted profits of USD 425 million approximately due to increased exports to the UK.
The UK and the UAE have had long diplomatic, cultural and business links; the UK government has been working to maintain the said links by making new post-Brexit trade deals. As the UAE is one of the important trade markets for the UK, the UK has already begun making efforts and has approached UAE to secure a possible free trade pact, post-Brexit. Through these trade pacts, the UK wishes to eliminate trade barriers wherever they can. Legally, the UK cannot sign trade deals yet, at least not until it is out of the EU, but they can have preliminary discussions and secure their position.
Additionally, the UK is trying its best to foster deeper relationships between the UK and the UAE and to encourage further investment into the UK. Gulf countries and primarily, the UAE, are strong investors in the UK. Experts state that as the UK will leave the EU and as the value of GBP will deteriorate (should that be a consequence), Among other sectors, real estate investors will benefit the most. Real estate is one UK market in which Middle East investors still have a strong presence, despite concerns about Brexit and how it would affect the property. It was revealed that two-thirds of the capital tracked from GCC countries was in Britain's property sector.
In today's political climate in the UK, it is also essential to talk about "no-deal Brexit". Currently, the UK government is planning for a "no-deal Brexit". This means that the UK would leave EU without any agreements in place about what the relationship between the UK and the EU will be in future, including agreements about how UK and EU companies would work and trade with each other. If an exclusive deal between EU leaders and UK politicians is not agreed upon, then the UK could leave the EU with no agreement in place, and this would not be good for any businesses, trade, border security etc.
In case of a no-deal Brexit, trade between the UK and EU would initially have to be on terms set out by the World Trade Organization (WTO), an agency with 162 member countries. Many companies worry that they could make their goods less competitive. Trading on WTO terms would also mean border checks for products. No deal would affect everyone from bankers and lawyers to musicians and chefs.
A majority part of the trade between the UK and the UAE comprises of the food products —while bilateral trade will not be affected by a no-deal Brexit, the overall supply of British food products and fresh produce could get scarcer and more expensive. Supermarkets in the UK have informed that there could be less available supply and higher price of food products. The reason for scarcity and higher prices would be the modified tax structures and transport delays — but for British exports to the UAE that could be mitigated by a fall in the value of the pound.
GCC will be among important beneficiaries if the UK exits the European Union without a deal. According to a United Nations (UN) report, the Gulf countries will post more than USD 1.1 billion (AED 4 billion) gains, as the GCC nations will be able to increase its exports to the UK in case of no-deal Brexit. The UAE will emerge as the biggest beneficiary among the GCC states and 13th worldwide (benefits of USD 425 million approximately) due to higher exports to one of the biggest economy.
In 2017, bilateral trade between the UAE and the UK totalled GBP 17.5 billion (USD 22.7 billion), up 12.3 per cent from 2016, according to official figures. By 2020, the UK government aims to increase its trade to about GBP 25 billion said the United Nations Conference on Trade and Development's (UNCTAD). As per another UN report, the UAE will see the most significant gain from a no-deal Brexit with profits of around USD 425 million due to increased exports to the United Kingdom. If both sides can forge beneficial trade deals with each other, this has the potential to stimulate economic growth as key services and products from the UK make their way into the UAE.
Whether we have a Brexit deal or a 'no deal' Brexit, one thing we know for sure is that it will affect all parts of the economy and every sector in which the UK operates. However, deal or no deal, UAE stands to benefit in both scenarios. We, along with the rest of the world have to now wait for 31 January 2020 to see in which direction does Britain go.
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