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  December 22nd, 2016 | Written by

Are UK Exporters Benefiting From Brexit?

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  • Brexit created a cloud of uncertainty, especially for SMEs that rely on exporting to the EU.
  • For the UK, the fall in the pound is a double-edged sword.
  • There is lingering doubt about whether the EU will survive.

In the months leading up to the Brexit referendum there was a great deal of anticipation, albeit tinged with anxiety, as to whether or not the UK would be acting in its best interests in exiting the EU. As of June, when the votes were counted, it was evident that the majority of voters was ready to break free of all the baggage that came along with being a member of a union that was seen as a drag on their own economy.

However, once it was a done deal and a final exiting was in the forecast, a cloud of uncertainty began to form, especially for SMEs that rely heavily on exporting to the EU. The question is, are exports benefiting from the impending exit or are they being harmed?

The GBP at the Heart of the Issue

The first thing to consider in any kind of trade is the value of the currency a company is dealing in. For the UK, the fall in the pound is a double-edged sword. Immediately after the Brexit vote, the British pound fell drastically against the U.S. dollar, a major forex pair commonly traded, which made it bad for the economy in some regards but actually a boon in others.

Exports were seen to benefit, according to a report by the BBC. Tourism also benefited as foreign tourists, especially from the United States, were paying less than previously for bookings in the UK. But on the flip side, UK tourists abroad were paying more due to a fall in the value of the pound.

Controversy over the Brexit Process Still Abounds

When David Cameron resigned following the Brexit results and the new Prime Minister Theresa May took office, nothing really changed in the eyes of voters. There was still controversy going on within the ranks as voters still held their ground on either side of the issue. Even so, when Prime Minister May announced mid-October her plans for invoking Article 50 in March with an aim of having completed the exit sometime in the summer of 2019, members of Parliament began immediately to contest this move on her part. Nothing will be known in regards to a decision on whether or not MPs can halt her invocation in March.

The Bottom Line – UK SME Exporters Are Likely to Benefit

So then, with the pound having lost much value against other major currencies and thus worth less when making purchases, it is also rather a benefit to those SMEs exporting goods because those trading partners find a more equitable trade in currencies. On the other hand, with Brexit also comes a great deal of uncertainty within the EU and those are Britain’s biggest trading partners. If those economies remain stable, which at this time is doubtful at least in the short term, exports will be as normal if not better.

But, with the outcome of the recent referendum in Italy along with upcoming elections in major countries in the EU, such as Germany and France, there is still lingering doubt about whether the EU will survive the coming years or have to be dismantled. For now, SMEs are seeing a benefit in exports but the future remains unclear.

Marcus Turner Jones graduated in economics from the University of Sheffield before working in London and Madrid. His particular area of expertise are the Latin American markets. He currently lives in Buenos Aires as a freelance writer and investor, with his dog, Luna.