Bahrain: Britain's exit from the European Union (EU) may open up more opportunities for Bahrain and also allow the UK to forge deeper joint-trade partnerships with GCC countries, according to experts.
Brexit could in general be considered a positive for the GCC as the depreciation of the British pound and corresponding weakness in the UK’s real estate space will translate into compounded benefit for GCC investors and traders, said Bahraini economist and chief executive of Jafcon Consultants Dr Akbar Jaffari.
“As the pound gets weaker, imports from UK will become cheaper and it will be cheaper to create fresh capital and make real estate investments there,” he said.
On the flip side, existing investments in the UK (both capital and real estate) will depreciate in value but these were long-term strategic portfolio investments.
So, if the pound weakens further, GCC investments in the UK will begin to look much more attractive and offer an exceptional opportunity to purchase UK assets.
Dr Jaffari said many Bahrainis have invested in the UK stock markets and would have seen an erosion in the value of their stock holdings.
“I feel the global stock markets have overreacted; the situation will remain volatile until Tuesday’s meeting between the UK and the EU.
“A lot of the negativity is psychological, not real, as I believe capital is a coward,” said Dr Jaffari.
There will, of course, be a domino effect on share prices in Bahrain and the GCC, but this will be short-term panic selling and the markets will stabilise soon.
A lot of panic in the market has been largely due to ignorance, according to Bahrain-based Karvy Computershare chief executive Avneesh Mishra.
“Eventually things will settle down. In the short term, there will be opportunities to pick up value stocks and good bonds as prices will be subdued. The euro and the pound will suffer in the short term but I am hopeful of recovery in 6-12 months,” Mr Mishra told the GDN.
He said many Britons may not even know what they have actually voted for. Voters, he said, now face a series of economic shocks that analysts say will only worsen before they improve.
According to a top Bahraini businessman, the Brexit vote was an indication that Britain was losing its leadership role.
It was an “emotional” decision that lacked “rationality” and will have a major impact on British economy and its “future leadership role”, said Al Baraka Islamic Bank chairman and Bahrain-British Business Forum president Khalid Al Zayani.
“I didn’t expect this because Britain had a leadership role in Europe, including in economics, politics and security.
“Now that role will be reduced and Britain will not have a say in decision-making in Europe.
“Statistics show that elderly people and most low-education level people voted in favour of leaving Europe.
“The voters wanted to save Great Britain but at the same time they are causing for it to get split up.”
Frankfurt will now take the leading role in Europe, he said.
Mr Al Zayani said Gulf investments in Europe has been affected by the vote. “We (Gulf and Bahraini businessmen) have huge investments in England.
“Now our investments have been reduced and to save our investments we have to pump in more money in the UK.
“Also, England was the hub for Islamic banking in Europe; now Frankfurt will take its place.
“London was always centre of economy and insurance in Europe and the world due to its strong relations with America and Europe, but now Britain has been separated.”
However, Mr Al Zayani said that the UK will bounce back.
“Britain is great and has always been great and I am sure that they will recover from this,” he said.
Bahrain-based OAK Utility Solutions and Development chief executive Gareth Brown, a company providing sustainable infrastructure improvement and clean-tech asset-based revenue generating solutions, told the GDN that as a long-term British expat he felt that there were immediate and short-term challenges.
However, he remained positive that in the medium-to-long term “the UK will remain one of the world’s strongest and most secure economies for trade and political ties”.
“There is clear concern around the UK’s financial stability and with the weakening of the pound, now at an all-time low since 1985 and the UK’s economic credit rating downgraded from stable to negative,” said Mr Brown.
“The immediate objective, has to be the restoration of calm, assurance and belief that this change does not mean the UK is now an undesirable.
“Having said that, as the dust settles in the coming days, it will be business as usual and there are many reasons to remain positive about UK prospects.
“The UK’s status as one of the most desirable investment economies will remain and investors will continue to place British markets as part of their important investment portfolios.”
He believed that the UK will lose minimal long-term traction having chosen to exit the EU due to its ability to reposition relations with countries in Europe to maintain key trading and political ties.
“Examples of this in practice can be seen in prosperous non-EU countries such as Switzerland and Norway.
“The inevitable change is a complex one, which could take several years but for the UK, the timely and speedy process to elect a new prime minister for stability as well as being the first state to evoke Article 50 of the Treaty on the EU to exit the EU, is of paramount importance.”
While there will be further fall-out, said Mr Brown, all under speculation at this time as other countries within the EU consider their positions in light of this historical change in the UK, which in turn creates added pressure on the Union under even more pressure to maintain its own stability.”
There have been few discernible knee-jerk reactions to Brexit thus far, according to Oxford Strategic Consulting head of social and economic research Dr Najat Benchiba-Savenius.
“The degree to which this will affect UK’s relations with GCC countries is yet to be known, but it is clear that a deep-seated and strong history together with trade and expertise will help reinforce rather than weaken existing ties as the UK seeks to strengthen associations outside Europe.
“Brexit will be up for discussion at one of our forthcoming Gulf Talent Advisory Board Fellows’ sessions that take place each quarter in the GCC.”
Oxford Strategic Consulting is an Oxford and GCC-based consultancy that specialises in building human capital across the GCC and Europe.
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