People are reacting in many different ways to Britain’s exit from the European Union. Some are supportive while others condemn the actions of the country that has long had mixed opinions among its populace as to whether they should stay a part of the conglomerate of European nations. One thing that many Canadians are wondering about is how Britain’s new referendum will affect their finances. Again, there are many possibilities, but it is important that people understand the facts of the situation before making major predictions.
How Brexit Could Affect CETA
The Comprehensive Economic and Trade Agreement is an agreement between Canada and the EU that allows Canadian companies access to the EU’s market. With the uncertainty created by Britain’s move to leave the EU, some think that Canada should avoid making any big moves until the effects of the Brexit can be better understood. The fact is that while it is likely that Britain’s referendum will go through, it is also possible that the country’s Parliament will reject the movement outright.
It is possible that the CETA will suddenly become an important strategic aspect of Canadian international relations in a way that it hasn’t before. If Britain attempts to remain in free trade with the EU, it is possible that it may face major concessions if it is to be allowed such access at all. The CETA is a way for Canadians to maintain ties with the EU in new ways.
Previously, relations with Britain were a major part of Canadian businesses’ entry into the rest of the EU. The new changes may open the doors to more diverse methods of trading that had previously not been considered when most Canadian CEOs enacted their transactions with the EU through their London offices. Now, Canadian businesses must find new ways to leverage the connections formed through the CETA, perhaps tapping into their links to France, Belgium, and Germany, along with other continental partners.
Reallocation of Resources
Some, such as Charles St-Arnaud, who works as an economist in London at Nomura Global Research, insist that the Brexit will be negative for Britain’s economy. However, how significantly this will impact Canada remains in question. For one, it will depend on how Britain chooses to act. In order to maintain its economy, Britain will have to allocate its resources towards other free-trade agreements, such as with non-EU countries and possibly the United States. St-Arnaud hypothesizes that Canada would be at the bottom of the UK’s list of potential new trade partners.
Whatever happens will surely have consequences for Canada, however, Canadian businesses will also have a say in the matter. The UK has been Canada’s biggest business partner in the European region, and if businesses in Canada wish to continue such exchanges in the wake of the Brexit, Canada’s government would first have to pursue a new trade agreement with Britain. As of now, Canadian officials will not discuss the possible impacts of the Brexit on trade relations. This is probably for the best until things stabilize.
What Financial Advisors Have to Say About the Brexit and Canada
While it is possible that the Brexit could bode significant consequences for Canadian business, it is impossible to be entirely certain as of yet. One thing to keep in mind is that the Canadian dollar has only fallen 1.5 percent in global stocks since the Brexit. Canada remains in active trade with the other nations in the EU, and it may turn out that the only country to really experience major losses as a result of the Brexit will be Britain itself.
In looking towards the future, financial advisors have their input on the situation. The words of Fisher Investments on Brexit remain skeptical and analytical. They have noted that in order to arrange an exit from the EU, member nations must negotiate exit terms, and they have two years to do so. It seems likely that the EU will wait until after elections in the UK. David Cameron himself stated that he would leave his office by October of 2016, leaving the question open as to whether the UK’s resolution will end up sticking in the long term. Vanguard’s Peter Westaway notes the Brexit impact on UK investors is significant, but comparatively minor for the Canada and rest of the world.
The Changes to Come
While things remain uncertain about the full scale of the impacts of Brexit on Canada and its businesses, it is best for people who hold large assets to be wary of making major moves regarding the EU and especially the UK. While CETA maintains its integrity, the shift in the EU’s economy may yet have unforeseeable consequences.