UK election's impact on trade
First there was Brexit and now, Theresa May’s disastrous election, losing 13 seats. The pound lost value, just like it did when the Brexit decision came out. The worrying point is, what does this mean long term for the United Kingdom (UK)? Political instability will not make for strong Brexit negotiations and, at the time of writing this blog, Mrs May had not done the proposed coalition deal with the Democratic Unionist Party (DUB), a right-wing unionist political party in Northern Ireland.
To effect Brexit, Mrs May needs a strong and stable government – something she has not got. There is the potential that when attempting to negotiate and extract the UK from the European Union (EU), the negotiations will paralyse her government, put strain on her coalition partner the DUB, and promote a serious and long lasting economic downturn for the UK. Mrs May has admitted that Brexit may not be achievable on the basis that a comprehensive extraction will likely devastate the UK economy. The reason is that for the UK to continue its all-important trade with the EU, it will need to abide by EU rules. If it doesn’t, it will be unlikely to get any EU trade deals. So the obvious question is why leave the EU, if you’ve still got to abide by the EU rules?
This cascades into the scenario: if there is no trade deal with the EU, then who is going to feed the UK? The obvious answer from New Zealand’s perspective is that we are. And perhaps you can take the US out of the equation if President Trump closes that country down to two-way trade.
So out of Brexit and the disastrous May election comes an opportunity for New Zealand exporters, provided New Zealand can negotiate a workable free trade agreement with the UK. It is almost like history repeating itself and New Zealand becoming the UK’s farm.
- Mike Chapman, CEO