The GCC view: Brexit – a blessing or a curse?

The initial response appeared to be everything the doom mongers had feared. Trillions of dollars wiped off financial markets, the British pound plunging to levels not seen for decades and immediate downward revisions for global growth.

But now, with the dust having settled and the initial panic over, the world has accepted with some reluctance that Brexit is inevitable and it may not be so bad after all.

Global stock markets have regained most of their losses prior to the vote, the issue of who will lead the country through its negotiations to exit the European Union has been resolved ahead of schedule and in some areas at least there is optimism about the opportunities Brexit has brought.

This is particularly true in real estate, where opportunistic Gulf investors are licking their lips at the prospect of London property deals at a discount with the double whammy of falling house prices and the weak British pound. Even if those with existing holdings will have seen some of their recent gains erased.

Also read: Brexit: How will it affect GCC property investors?

More broadly too, UK expats in dollar-linked Gulf countries have seen the value of the money they send home increase dramatically in a short space of time. While Gulf nationals will surely appreciate their local currency going further as they visit the UK this summer.

Then there are the potential trade deals on the horizon.

Having won the Conservative Party election and leadership of the country along with it, Britain’s second female Prime Minister Theresa May has embarked on a mandate to make
Brexit work.

This will mean reforming the UK’s trade relationships with the world, including the Gulf states, and members of her cabinet are keen to prove the country can stand on its own two feet.

Also read: Brexit: UK may be able to trade faster with the GCC

As her adviser David Davis noted in a comment piece picked up by UAE state news agency WAM, leaving the EU will give Britain full control of its trade policy and the ability to forge free trade agreements with individual countries as it pleases.

In the piece published shortly before May’s inauguration as prime minister, the recently appointed secretary of state for leaving the EU was quoted as saying the country should take swift action to negotiate deals with its main trading partners, including the UAE.

“Trade deals with the US and China alone will give us a trade area almost twice the size of the EU, and of course we will also be seeking deals with Hong Kong, Canada, Australia, India, Japan, the UAE, Indonesia – and many others,” he said.

Also read: Brexit will not have major impact on GCC sovereigns – Moody’s

Still this is not to say there are no clouds on the horizon. May’s appointment has brought stability to a country beset by political infighting but even she cannot reverse the damage that has already been done at home and abroad.

Last month, the International Monetary Fund listed Brexit as the reason for reducing its global growth forecast by 0.1 per cent for this year and next year to 3.1 and 3.4 per cent respectively.

Then there are the broader impacts of a weaker pound that may be felt more keenly here in the Gulf than in other regions.

Britons were the second largest investment group in Dubai property last year, accounting for more than Dhs10bn of transactions. Similarly British nationals were the third largest visitor group to the emirate in 2015, accounting for 8.4 per cent of tourists or 1.2 million people.

If the pound’s weakness continues both sectors could be hit hard in Dubai and across the region, as Brits turn to cheaper locations for their investments and holidays.

The UK’s decision to leave the European Union has created exciting new possibilities for trade relations with the Gulf region, but in the short term at least we will have to endure the side effects.

Robert Anderson is deputy editor of Gulf Business