Troubling times for traders


The ‘debate’ over next month’s referendum on whether Britain should stay in or leave the European Union has heated up so much that it is starting to look like civil war. It seems to be tearing apart the Tory party and indeed the whole country. A wider worry in the event of a Brexit is the collateral damage in Portugal and other EU countries.

Brexit cheerleader Michael Gove says leaving would be “an empowering moment of patriotic renewal.” The Governor of the Bank of England, Mark Carney, evoked fury in the Brexit camp by saying that leaving might spark a recession.

Then the IMF’s Christine Lagarde weighed in by saying she had “not seen anything that’s positive” about Brexit. Her remarks were dismissed by Brexit supporters as “nonsense”.

Lots of strong opinions continue to be aired, but in truth no one knows for sure what a Brexit would bring. No country has ever left the EU before.

Amidst all the internal rhetoric, scaremongering and false forecasts, a calm but concerned outlook emerged this week from the British Portuguese Chamber of Commerce in London.

Founded in 1911, the BPCC is an independent, non-profit organisation devoted to promoting commercial links between businesses in the United Kingdom and Portugal.

The UK is one of Portugal’s major export destinations, with almost €3 billion worth of goods going there every year. Few countries do more business with Portugal.

The BPCC reports that research conducted by international shipping experts ParcelHero (see article How Brexit might affect the UK and Portugal) concludes that the impact of a Brexit on this market could be huge. It could have serious implications not only for Portuguese traders, but also consumers.

“It’s impossible to overstate the importance of the EU to Portugal’s trade with the UK,” writes Keegan Spindler, a member of the consumer research team.

“The free movement of goods has allowed British companies to be competitive in the European market, and the cost of shipping in the EU is significantly lower than shipping to European countries that aren’t part of the Union, such as Switzerland or Iceland.

“Our research suggests that by leaving the EU, the cost of goods imported to the UK from Portugal could change by as much as 30%. That price change comes from a variety of factors that include raised shipping costs, duties and taxes and handling costs.”

Such a price change would make Portuguese goods less attractive to British consumers and reduce Portuguese manufacturers’ abilities to compete on price in the UK market.

Most Portuguese small to medium enterprises are likely to look elsewhere for their customers if Britain leaves the EU, but those who don’t will have all new challenges to deal with, among them paperwork, customs clearance, and duties and taxes. Furthermore, the United Kingdom will no longer be a competitive target for the logistics industry, which is likely to mean that shipping costs will rise significantly, according to the study.

The UK is expected to be separated from countries like Portugal by a lot more red tape, making it a much less attractive proposition for international businesses.

“Our data suggests that the UK’s departure from the EU would likely force many SMEs who trade in the country to find new markets for their goods or be forced to quite literally pay the price. Similarly, a Brexit would see the cost of importing into Portugal from the UK increase, and as Britain is one of Portugal’s biggest importers, it could be the consumers who end up paying the price.”

None of the above will apply, of course, if the Great British public decide on June 23 that voting for Michael Gove’s “empowering moment of patriotic renewal” would in fact be akin to a catastrophic moment of total madness.
Which way will it go? No one probably knows better than the betting bookmakers. Paddy Power’s latest odds:

2/5 in favour of remaining in.
15/8 in favour of exiting.

Len Port is a journalist and author based in the Algarve. Follow Len’s reflections on current affairs in Portugal on his blog: