BrexitWhat are the implications for exporters

and importers?

Size of the UK economy

UK GDP (2015) 2.858 Trillion USD

Population 65 million

For comparison purposes:

Spain’s GDP 1.2 Trillion USD

Population 46 million

UK Balance of Payments for trade in

goods (Data is for 2014)

UK Exports 472 billion USD

UK Imports 663 billion USD

Visible Trade Deficit 191 billion USD

UK has a trade surplus in services that

partly counterbalances its trade

deficit in goods.

Main UK exports

Cars

Gold

Petroleum (crude & refined)

Packaged medicaments

Services

Main UK Imports

Cars

Gold

Petroleum (crude & refined)

Packaged medicaments

Computers

UK’s main trading partners

For exports and imports:

United States

Germany

France

The Netherlands

Switzerland

Only for imports:

China (but China is also a foreign investor in the UK)

UK net trade balances for goods (trade

deficit) and services (trade surplus)

First conclusions about the UK economy

The UK is a trading nation with an open economy.

The UK relies on imports to meet the needs of its

domestic consumer market.

The UK has historically run a trade deficit in goods.

The UK relies on exporting services to counterbalance its

physical trade deficit.

Foreign direct investment is also an important source of

foreign exchange for the UK, as is the income earned

overseas by UK companies and individuals.

How will Brexit affect trade between

the EU countries and the UK?

The value of Pound Sterling has fallen and

may fall again against the Euro and the

USD.

In the future, there could be import tariffs

on goods exported to the UK from the EU?

The UK has declared that it will leave the

EU Customs Union, which has many

implications for future customs procedures

affecting importers of goods into the UK.

How will Brexit affect trade between

the EU countries and the UK?

• What “Rules of origin” will the UK apply to

imported goods?

• The UK’s financial services exports are at

risk, if and when, “passporting” is

eliminated.

• When will the UK conclude a trade

agreement with the EU?

• When will the UK reset its place with the

World Trade Organization (WTO)?

What happens when UK leaves the EU’s

single aviation market?

Gibraltar - Could Spain scupper a deal

with the EU on landing rights by

excluding Gibraltar airport?

Exchange rate – Euro Pound

Before the UK referendum, 1 Euro used to buy between 0.75

and 0.8 Pounds.

Since the referendum in June 2016, 1 Euro buys between

0.86 and 0.9 Pounds

This is a devaluation of Sterling against the Euro of between

11% and 13%.

Conclusion: Exports to the UK from the EU will probably

have to raise prices. This will cause a rise in UK inflation.

Discussion questions You are representing Spanish rice exporters who annually

export Spanish rice to the UK through the wholesale rice market.

How are you going to approach your contract negotiations on prices for the current year (2017)?

Will you recommend hedging (at a cost) your future income in Sterling to secure its value in Euro because you fear a further devaluation of Sterling?

What strategy would you recommend adopting for 2018 and 2019 price negotiations with UK rice importers?

Would you abandon the UK market in favour of other markets with better price/income potential?

UK Trade in Services (2014 & 2013)

Will the UK’s pattern of trade change?

What will be the UK’s source of competitiveness?

What are the likely economic effects of

BREXIT on the UK economy after 2019?

Lower Sterling exchange rate against Euro? What level?

Rise in inflation? What level?

Fall in purchasing power of UK consumers? How big a fall?

Cost of tariffs?

Cost of complying with customs procedures?

Rules of origin issues?

Discussion question

You are the export manager for a European

car manufacturer.

What will be your future marketing strategy

for exporting vehicles to the UK?

Conclusions about the final impact of Brexit

on EU exporters with a UK market share.

EU exporters to the UK face years of uncertainty.

Devaluation of Sterling and its potential future vulnerability pose

pricing difficulties for companies exporting to the UK.

Costs of importing goods into the UK will probably rise.

The UK consumer is likely to start losing purchasing power and this

will lower demand in the UK consumer market.

The UK government may adopt monetary and fiscal policies to

stimulate the UK economy after Brexit.

Interest rates in the UK may rise to dampen inflation.

Exporters need to develop a strategy and a plan to weather this

difficult passage of transition in exporting to the UK market.