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The Business Advisory Blog

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Alliott NZ Chartered Accountants Auckland
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Brexit likely to cause headaches for Kiwi firms

brexit-1462470592ZSA-437NZIER's report “Do you think you’re better off alone?” explores what Brexit might mean for New Zealand.

Weaker UK income growth will dent New Zealand’s exports  

“The post-Brexit picture is horribly murky. No one knows precisely how it might play out, especially after the two-year withdrawal period lapses”, said John Ballingall, NZIER’s Deputy Chief Executive.

“But when the smoke clears, the most obvious impact on New Zealand of a Brexit vote will be on our exports to the UK, which could drop by $190 million per year due to slower UK income growth”, Ballingall said.

Slower income growth is likely to dampen the demand for our tourism exports, as UK travellers may well postpone long-haul travel until economic conditions improve.  

But Kiwi firms shouldn’t face higher trade barriers

The report also notes that accessing the UK market should not get any tougher for New Zealand goods exporters. “For manufactured goods, the UK is likely to default to using the EU’s existing World Trade Organisation (WTO) commitments on tariffs, as it does at the moment”, Ballingall said.

“The likely market access arrangements for our primary exports are more difficult to determine in advance. We would hope that any renegotiation of the UK’s WTO commitments would leave New Zealand exporters no worse off than now”, he added.

Post-Brexit uncertainty may pose additional challenges for New Zealand

New Zealand and the UK also have a substantial investment relationship, with the UK holding a stock of investment of over $4.2 billion in New Zealand. 

“We might expect UK investors to become more risk-averse while the Brexit carnage plays out, and that could limit the extent to which they see investment in New Zealand as a priority”, Ballingall noted.

There could be ongoing challenges for Kiwi workers looking to access the UK labour market if the political environment becomes more nationalistic.
            
“Brexit would also be a further stinging slap in the face of ongoing economic integration initiatives at a time when the political discourse is already turning against deeper trade liberalisation”, he added.

Mr Ballingall summed up by saying “With Brexit, the only certainty is uncertainty. And this uncertainty is unlikely to be in New Zealand’s interests”.

Source NZIER

Topics: brexit economy exports