Brexit slams Pound as trade continues with Europe
On 23rd June 2016, the citizens of the United Kingdom voted in a referendum and determined to leave the European Union at some point in the next two years. The impact, for the UK at least, was serious and immediate, with a major write down of the UK Pound being at the forefront of concerns about the future of the UK in a post EU period.
The decline in the value of the UK Pound, relative to the US Dollar was an immediate 8.5% on the 24th June. By mid-July, the decline had firmed to 14.5% and appeared relatively settled. This is displayed in the following chart, compared with other relevant currencies.
Of those who voted (more than 30 million), the leave vote won 51.9% of the total vote. One particularly rancorous element to the debate, is that the majority of those over 45 voted to leave and the majority of those below, voted to stay. Many ‘remain’ campaigners considered their future had been decided by those with less at stake in the decision.
Just as challenging for the future of the EU, in terms of regions, only Scotland, Northern Ireland and London voted to remain. Every other region saw majority votes for Brexit.
Britain will commence negotiating its terms of departure from the EU, just as its economy is reeling from the consequences of the somewhat unexpected decision. It will do so with Scotland in particular (and Northern Ireland also, but to a lesser extent) considering their own independence and engagement with Europe.
Meantime, Australia’s trade with the European Union – in wood products and all other goods – continues to chug along at a healthy pace, with significant deficits for many goods. Wood products are no exception.
For the year-ended May 2016, Australia’s imports of wood products from the EU were valued at AUD 324.5M, 8.4% higher than the prior year. In the month of May 2016, imports from the EU were valued at AUD27.3M and were dominated by:
- Czech Republic ~ AUD3.9M
- Germany ~ AUD3.5M
- Estonia ~ AUD3.4M
For the year-ended May 2016, Australia’s exports of wood products to the EU were valued at AUD6.3M, 4.9% higher than the prior year, but largely insignificant. In the month of May 2016, exports to the EU were valued at a very small AUD0.6M.
In total the balance of trade deficit with the EU for the year-ended May 2016 was AUD318.2M.
This data is displayed in the chart below, noting that it includes the trade with the United Kingdom.
In terms of Australia’s wood products trade with the EU, the United Kingdom barely rates a mention. For the year-ended May 2016, imports of wood products were valued at just AUD2.2M and exports to the UK, an even smaller AUD1.9M.
Brexit appears to rate as a genuine mess for the United Kingdom, something of a concern for the European Union, an aggravation and unwelcome disturbance to the global economy and of very limited importance to Australia’s forest and wood products industry.