GCC would be among major beneficiaries if the UK exits the European Union without a deal
The Gulf countries will post more than $1.1 billion (Dh4 billion) gains as the six-nation bloc will be able to increase its exports to the UK in case of no-deal Brexit by October 31, according to a UN report.
The UAE will emerge biggest beneficiary among the GCC states and 13th worldwide as it will get benefits of $425 million due to higher exports to one of the biggest European economy, said the United Nations Conference on Trade and Development's (UNCTAD) report.
In 2017, trade between the UAE and the UK totalled £17.5 billion ($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 £25 billion.
Liam Fox, UK's secretary of state for international trade, said in February 2019 that his country is looking forward to have a free trade agreement with the GCC bloc in the right time.
According to the UNCTAD report, Saudi Arabia is expected to gain $267 million through increased exports closely followed by Kuwait at $263 million, Qatar at $157 million, Bahrain at $16.7 million and Oman at $8.4 million.
In latest round of talks, the EU has agreed to extend the Brexit deadline until October 31. However, a review of progress is to be held in June.
As the UK is set to exit the European Union, its trade policy will likely be changed according to its national priorities. This change could have dramatic consequences for some developing countries.
The UK accounts for about 3.5 per cent of world trade and represents an important trading partner for many developing countries. In 2018, the UK imported almost $680 billion worth of goods, of which $360 billion came from EU countries.
China tops the list
Globally, according to the report, China will emerge the biggest beneficiary, gaining $10.2 billion in exports, followed by the US, Japan, Thailand, South Africa, India, Brazil, Russia, Vietnam, New Zealand, Canada, Australia, the UAE, Bangladesh, Indonesia and Argentina.
While the European Union will be biggest loser due to no-deal Brexit, losing $35.5 billion in exports to the UK.
The UNCTAD's 'Brexit implications for developing countries' report noted that in the event of a no-deal Brexit, EU preferential trade agreements with third countries would abruptly cease to apply. In such a case, the UK market access conditions could take place on Most Favoured Nation (MFN) terms.
Anita Yadav, head of fixed income research at Emirates NBD, said that a no-deal Brexit may cause a substantial volatility in the value of pound against the dollar and consequently against the dirham.
"A depreciated pound will restrict British investments in the UAE, particularly in the real estate segment and British tourist arrivals in the UAE will likely fall. Around four per cent of the UAE's imports come from UK and are mainly in machines, engines, equipment, pharmaceuticals and cosmetic segments. Lower pound would reduce the cost of these for UAE businesses," she said.
Rajiv Kumar, senior executive officer, PhillipCapital (DIFC) Private Ltd, said the opportunity offered by the cheap pound is significant. As per data available, the GCC is now the UK's fourth-largest export market for goods outside the EU after the US, China and Hong Kong.
"Given the booming bilateral trade, it's obvious that the eurozone's recent slowdown due to factors like Italy's technical recession, Brexit and slowing global growth may impact the UAE and GCC countries. On the upside, it could mean that products from the EU will become more competitive and stimulate buying interest from the GCC countries," Kumar said.
He noted that oil and other exports from GCC countries to the EU may also suffer if the euro depreciates further against the dollar.