Principle beneficiaries of Brexit

By Syed Sadaqat Ali Shah

Who will benefit from Brexit is nowadays highly discussed, on-the-table, with contradictory arguments, and still recent topic for every concerned stakeholder. Every new day starts with conflicting arguments- one group supports Brexit whilst another oppose it, and every new day ends with new forecasts for the new day. Principle beneficiary of Brexit, according to defenders of Brexit, is U.K arguing citizens of U.K now will enjoy open market for hunting jobs unlike immigrants who are expected to be forced to leave U.K. Opponents unlike defenders of ‘Leave Vote’ opine otherwise by arguing that key victim of Brexit will be U.K itself. They opine restrictions, among many other restrictions, on access to free market, after British formally leaves 28-nation bloc, in every form will have colossal cost for U.K economy.

Though the ripple effects of Brexit on global economy cannot be shirked and disregarded the impact however will be limited on the global economy, in contrast to its long term impact on British economy, because many countries will to a larger extent benefit from the U.K’s loss. U.K until recently was an attractive destination for foreign investors and was viewed as a gateway to other European countries. The plebiscite will diminish this attractiveness after U.K part ways with EU.

Besides key beneficiaries of the Brexit the big loser will be U.K itself in particular and EU in general because both will loss access to free and single market. British will bear direct impacts and which may extend to long term irreversible financial and economic crisis. EU on other end will experience a contracting GDP and sluggish growth that is unlikely to return to pre-Brexit level. Low oil prices are not good for health of Russian economy and sluggish growth is detrimental to European Union. The European crisis it seems will be irreversible this time.

There are however principle beneficiaries of Brexit and fractured EU in that both EU and British offer unparalleled business opportunities for outsiders. Which countries outside EU will turn Brexit for their own advantage? Diplomatic relations and trade histories, prior to signing any trade agreements, will play pivotal role.

Though European Crisis means much for China due to its reliance on export to EU, China among other competent economies will vie to grab maximum shares through signing multiple trade agreements with U.K, after it formally part ways with EU, and European Union respectively. China due to factors of comparative advantage and relatively stable economy will exploit circumstances for its own maximum advantage. It now relies on China how it responds and exploit European crisis to its advantage- whether mutually beneficial agreements will be signed or that China will prioritize, like it does, mercantilism, an economic system which encourage exports and discourage imports by levying heavy tariffs. Will China encourage European banks and firms by relaxing its laws to serve Chinese financial market are still unanswered questions. For reasons of competency in producing cheap goods Chinese entrance into EU market will be threat to existing competent firms.

The burgeoning economy of India backed by government’s generous and lenient regulations has given impetus to the economy to grow at faster pace than ever before. The incumbent government has until now displayed exemplary performance and has accomplished widely recognized milestones in recent history of India, at least, by placing economic specialists at the helm of business affairs. India therefore, as seen to counter Chinese presence, will contend for superiority by signing generous trade agreements with U.K and EU. India nevertheless is advantageous due to presence of Indian diaspora in Europe and U.K and familiarities with EU. Simultaneously India recently has made generous changes in Foreign Direct Investment policy with aim to make India an attractive investment destination for foreign investors. Announcing one hundred percent FDI in various sectors by Indian government is an indication Indian economy is open for all. Presence of Indian diaspora will in fact enable India to gain maximum shares in EU and U.K. It is worthy to mention that India currently owns about 800 companies in U.K becoming one of the leading investor in the economy that employees approximately 110,000 people.

The military intervention by Russia in Ukraine and subsequent imposition of sanctions on Russia by U.S and its European allies has shaken Russian economy. In addition to this military intervention the decline in oil prices in recent years has hit Russian economy gravely. Disintegration of U.K from the 28 nation bloc will mean more than enough for Russia by re-opening trade gates for EU and U.K respectively. U.K and Germany unlike other European countries who still want financial relations with Russia, had been staunch proponents of sanctions against Russia which will in medium to long term diminish. European Union without U.K will be less likely to sustain sanctions against Russia.

The biggest beneficiary in terms of politics and economics will be U.S. Global currency market saw and experienced stronger greenback against pound sterling. Pound sterling plunged to historical lows against U.S dollar. Just like U.S rose to predominance after oil prices hit Russia same is the case of Europe’s infighting, benefitting U.S economically except when and if Donald Trump is elected as President of the U.S the situation and circumstances will turn otherwise and against U.S. Although U.S has been trapped in worse economic malaise its encouragement for creative minds and ideas has made it resilient and formidable over the past many decades.

The situation of U.S and British will not be different if citizens of the U.S choose Donald Trump their president in November this year. Triumphant Donald Trump will, as per his plan if he is elected as president, make America great by withdrawing its forces from countries around the globe hence minimizing U.S’s role in international politics thereby creating a vacuum for Russia and China for which they vying since long ago.

To some extent if not to a larger extent Brexit will prove as beneficial for UAE, Qatar and Bahrain for reason that Brexit had during leave campaign a racist voice to curb immigration and entry of foreigners. UAE and alike due to diversified economies and welcome attitude will turn circumstances for their own advantage by welcoming more talent irrespective of their religions, beliefs, color and race. If U.K turns strict on foreigners and forced them to leave U.K UAE may prove best and lucrative destination for them. Therefore like economical benefits countries will struggle to gain from Brexit the war for talent may begin. As I in my previous article mentioned opportunities never cease or ends I reiterate opportunities shifts and you have to chase them and hunt them appropriately.

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Syed Sadaqat Ali Shah

Syed Sadaqat Ali Shah is a researcher and works on banking regulations, competition and reforms.

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