The Impact of ‘Brexit’ on Ghana-UK Economic Relations

Brexit‘Brexit’, the unprecedented outcome of the 23 June 2016 referendum on the United Kingdom’s membership of the European Union (EU), has caused shock and turmoil in global markets. The value of stocks and the British Pound Sterling have all been badly hit in the days after the referendum. As at the close of day on 24 June, the United Kingdom’s FTSE 100 stock market index closed down over -3.15%, the Euro Stoxx 50 index down -8.62%, DAC and CAC 40 at -6.82% and 8.04%, respectively. Brent crude oil fell 4.91% to less than US$48 per barrel whereas the spot price of gold gained +4.69% to US$1,316 an ounce. Conversely, many emerging market currencies recorded some gains. For example, the South African Rand made major gains against the Sterling.

In concluding, Ghana may have to start bilateral talks with the UK to renegotiate various agreements before it formally exits from the EU. A weaker pound could make UK imports into Ghana relatively cheaper and whereas Ghanaian exports to the UK could earn less, all things being equal. We are likely to see lower remittances from Ghanaians in the UK in the short term. While Ghana may benefit from an upside in gold prices in the short term, the net effect of this on the economy given the country’s high debt service costs and currency pressures remains uncertain. We could potentially see more skilled economic migrants relocating to the United Kingdom from Ghana should an “Australian-style points system” for immigration to be applied migrant workers, if all requirements are met. This could, however, also have a detrimental effect on the quality of services in Ghana especially in areas such as the health sector.

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Download Paper: GGDP_CIN12_Ghana_UK-Trade-Post-Brexit_Final

 

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