What Brexit means for the GCC

Britain’s historic decision to leave the European Union (EU) has caused massive economic and political chaos. World financial markets tumbled immediately after the vote and the British pound fell tremendously. Britain will look to further engage in trade to offset some of its economic loss.

The Gulf Cooperation Council (GCC) currencies are fixed to the U.S. dollar; therefore, the drop of pound against the dollar means that UK-based GCC investment opportunities have become rather inexpensive.

However, the Brexit will directly affect large investments in Britain held currently by Gulf sovereign wealth funds and other high net worth individuals, who might seek a safer haven for their investments.

If British conservatives remain in government after a new Prime Minister has been voted, then they will work on rebuilding economic relationships with the Gulf States, as they have in the last couple of years. Also, the pressure caused by the Brexit and the promises made by the leave campaign, will lead to better bilateral trade agreements between the two regions if the GCC play their cards right.

Nonetheless, trade agreements between the two regions are also vital for the GCC due to exports to the UK and EU that are still heavily focused on oil and energy, and any potential economic slowdown as a result of Brexit, could pile additional pressure on oil prices.

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