12 Jul The Divorce of the Century: Brexit

Brexit Impact on Businesses UAE | Challenges & Opportunities

Yes, it happened. The divorce of the century: Brexit.

The United Kingdom’s historic decision to leave the European Union has triggered panic in and shocked global markets as the sterling fell to its lowest value since before 1985. The sterling tumbled, the Prime Minister announced that he will step down and the UK’s FTSE 100 stock index lost 3 percent of its value that day.

Own a business in the UAE and wondering how you might be affected as a result of Britain’s shocking exit from the EU?

There’s no need for immediate panic for Brits in the UAE. But, we won’t blame you for feeling jittery, so with no further ado, here are some of the immediate consequences of Brexit for the UAE:

1. Now would be a good time to change your dirhams to pounds If you are an expat sending money to the UK, you will need less dirhams for the same amount of sterling.
2. Home trips may become cheaper Get more bang for your buck when exchanging holiday money or booking hotel stays in pound. Consequently, this is likely to make visiting the UAE for people in Britain more expensive, given the dwindling sterling.
3. Don’t panic if you’ve got investments in the United Kingdom Instead, now would be a good time to expand your investment portfolio, especially real estate. Consider dipping a toe into London’s property market, as London residential property is now cheaper for international buyers looking to enter the market
4. You won’t be affected if you have a Schengan visa The UK is not party to the Schengan Agreement.
5. Looking to pick up a Bentley or Aston Martin? Then, smile. Imports from the UK are likely to become cheaper as the UAE imports a lot of luxury cars.

The good news is that there has been limited interconnectedness between the UAE and UK financial systems. The UAE dirham is pegged to the US dollar and there are only few areas through which instability of and uncertainty about future UK and EU relations could affect the UAE economy. So, business-wise, the UAE seems quite well-equipped to handle the Brexit shock.

Brexit Impacts on UAE Businesses

The UK’s exit from the European Union (EU) in 2020, commonly known as Brexit, has had a mixed impact on businesses in the United Arab Emirates (UAE). While significant disruptions haven’t materialized, some adjustments have been necessary, and new opportunities have emerged. Let’s delve deeper into the key areas affected by Brexit for UAE businesses:

Trade Disruptions

• Customs Procedures: Following Brexit, the UK established its own independent customs regime. This means that UAE businesses that can export or import goods to/from the UK may experience delays at customs due to new documentation requirements and inspections. Businesses should stay updated on the latest regulations and work closely with freight forwarders to ensure smooth clearance of goods.
• Tariffs and Quotas: The trade deal struck between the UK and EU aims to minimize disruptions, with many goods continuing to trade duty-free. However, some products might now face tariffs, and quotas could be implemented in specific sectors. Businesses should carefully review the UK’s “tariff schedule” to understand any potential cost implications for their goods.

Supply Chain Issues

• New Regulations: The UK has implemented its own set of product safety and regulatory standards. This could lead to complexities for UAE businesses that previously relied on EU certifications. Businesses may need to adapt their products or obtain additional certifications to comply with UK regulations, potentially causing delays in their supply chains.
• Sourcing from the UK: The additional paperwork and potential delays at customs could impact the efficiency of sourcing materials or finished goods from the UK. UAE businesses might explore alternative suppliers within the EU country or other regions to mitigate these risks and maintain a smooth supply chain.

Investment Climate

• Attractiveness of the UK Business: The long-term impact of Brexit on the UK’s attractiveness for foreign investment remains uncertain. Some businesses might have reconsidered investing in the UK due to potential trade barriers and vulnerable UK economy. However, the UK government has actively pursued new trade deals globally, which could offer new opportunities for UAE investors.
• Existing Investments: UAE businesses with existing investments in the UK may not face immediate disruptions. However, they should closely monitor any changes in regulations or tax implications that could affect their operations.

Opportunities for UAE Businesses Post-Brexit

While Brexit has presented some hurdles, it also offers exciting opportunities for UAE businesses to adapt and thrive in the new economic landscape. Here’s how:

Adaptation and Advantage:

• Diversification: UAE businesses can diversify their trade partnerships beyond the UK and EU. This could involve exploring new markets in Asia, Africa, or Latin America, leveraging the UAE’s strong trade connections.
• Focus on Free Trade Agreements: The UAE has a robust network of Free Trade Agreements (FTAs) with various countries. Businesses can capitalize on these agreements to optimize their supply chains and market access to preferential customs treatment.
• Value-Added Services: UAE businesses can move beyond simply being a trading hub and offer value-added services. This could include logistics, warehousing, light manufacturing, or product customization, catering to the specific needs of regional and international clients.

New Trade Partnerships:

• Strengthened UK-UAE Ties: Despite Brexit, the UAE and UK remain strategic partners with a strong economic relationship. The two countries are actively negotiating a free trade agreement (FTA) which, if finalized, could offer significant benefits for businesses on both sides. This could include tariff reductions, streamlined customs procedures, and increased investment opportunities.
• UAE as a Gateway to the Middle East: The UAE’s strategic location and well-developed infrastructure position it as a crucial trade hub for the Middle East and North Africa region. Businesses can leverage their existing presence in the UAE to act as a bridge between the UK and the broader region, facilitating trade and investment flows.
• International Trade Expansion: The UAE has a robust network of free trade agreements with countries across the globe. Businesses can utilize these agreements to expand their reach into new markets, mitigating any potential trade barriers with the UK and capitalizing on diverse economic opportunities.

Capitalizing on the UAE’s Strengths:

• Business-Friendly Environment: The UAE’s commitment to foreign investment, with initiatives like relaxed visa regulations and ownership structures, continues to attract businesses from around the world. This allows UAE-based businesses to act as a springboard for companies seeking to enter the region or expand globally.
• Advanced Infrastructure and Logistics: The UAE boasts world-class infrastructure, including efficient ports and airports, which facilitate seamless movement of goods. This, coupled with a strong logistics network, positions UAE businesses to capitalize on new trade opportunities efficiently.

Every change brings with it opportunity as well as challenges. No one knows quite how this will all pan out, so brace yourself.

And remember the popular British meme:

KEEP CALM AND CARRY ON