Could the Brexit move impact GCC Countries?

Remain or Leave?

On 23rd June 2016 UK was in the eagerness of voting for what they saw as a foregone conclusion, that there would be no change in the UK and UK would indeed remain as a part of the EU. So on a rainy Friday, when UK indeed realized that the Brexit had had more of an impact than any politician expected; it was a signal to begin new trade relations and to fortify the existing ones. With plummeting financial currency, a falling currency and a new power at No. 10 Downing Street, May has her work cut out to bolster trade with other countries, especially when pitted against the EU, their erstwhile ally.

GCC Countries Friend or Foe?

While the short-term effect on the Gulf Corporation Council was volatile, the medium term might not be all bad news. Most of the trading currency in GCC Countries are still in US Dollars, but with the falling Pound, UK Based investments may seem far more attractive. This could lead the Yellen, the Federal Bank Governor, to keep the US rate hikes dovish, to keep the GCC Countries investments cantered around the US. With oil prices at a low, low rates are a welcome change for the GCC Countries.

Trade in GCC Countries and Brexit

The six member countries of GCC are already the fourth largest exporter from EU and the fifth largest global partner in terms of trade. With $155.5 Billion at stake, neither EU nor Britain is going to take the GCC for granted. On the other hand, Britain is under a lot of pressure to increase trade with the GCC countries and the default trade system of WTO Most favored Nation tariff regime will not change.
Moody’s report of 12th July 2016 reiterates the same stand that the sovereign wealth fund portfolio will have negligible effect with Brexit or the Pound devaluation.

FTA with GCC Countries?

The negotiations for free trade agreements with EU has stretched for a couple of decades, hence with the pressure of building new powerful trade partners for Britain, this may well be a good time for the GCC-Britain FTA to come to life. The Conservative government of the UK has always been pro-Gulf trade, despite heavy criticism from the Labour party, which calls the foreign policy a mercantile one.

GCC Countries Investments in the UK

The Qatar Investment Authority building, which remains a landmark in Canary Wharf, may be a victim of the real-estate crisis in UK. The existing businesses will not only have to take a hit on the real estate fall, but also need to make decisions on whether to keep the head office in London or move to the greener pastures of EU.

Pound Pounded?

A hit on the pound will definitely make the people living in UK lower their standards of living and hence the exports from GCC Countries to the UK will fall. This would also mean that the number of visitors from UK to the Gulf countries fall, especially in light of the significant growth over the years, QIA has a vested interests with ownership in Heathrow airport as well as the company owning British Airways, and the obvious government owned Qatar Airlines.

Despite all the odds, Britain needs to strengthen the relationship between the two regions and that competition will only carve the way for other regions like EU and USA taking the rivalry to another level, where rate cuts and better trade relations will only welcome the GCC Countries.