Brexit a big question mark for Canadian investors, expert says

While the U.K. negotiates its exit from the European Union, creating a cloud of investor uncertainty, a former head of the British Foreign Office will tell a Calgary crowd he believes “efforts to re-energize the European project” are on the horizon.

Simon Fraser, who now provides business clients with advice on Brexit and regulatory issues, will address the Global Business Forum in Banff on what the future holds for Europe, which has implications for Canadians with money tied up in that continent.

Fraser said Brexit is not the European death knell that some have feared but, as the economic landscape across the Atlantic shifts, there are some big questions for Canadian businesses.

Onequestionmarkloomsaround Canadian trade with Britain, given that the Canada-EU trade deal will no longer apply to the U.K. after its formal exit, Fraser said.

“Generally, there is more uncertainty and instability that people in boardrooms need to be thinking about as they make long-term choices,” he said in an interview ahead of the Alberta forum, which begins Thursday.

The annual two-day conference at the Fairmont Banff Springs will also feature talks on cybersecurity, North Korea, energy and North American co-operation in the era of Donald Trump.

Fraser, who also served as chief of staff to the European trade commissioner in Brussels, said he believes there is “no way” the U.K. and EU will finish talks on their divorce and their future relationship post-Brexit by the March 2019 deadline set for the negotiations.

Ahead of U.K. Prime Minister Theresa May’s major speech on the state of Brexit set for Friday, Fraser said “little progress has been made” in the negotiations, which he said are mired in disagreement.

If Britain leaves the EU without a deal — which would be “very bad in terms of the trade relationship,” Fraser said — there would need to be a transitional arrangement until all the terms have been agreed upon, he said.

The talks have had real economic impact. British retailer John Lewis, which saw its profits cut in half during the first six months of the year, said last week U.K. consumers have curtailed their spending amid rising inflation and uncertainty triggered by Brexit, the Guardian reported.

“Brexit is having an impact on everybody,” John Lewis chairman Charlie Mayfield was quoted as saying in the British newspaper.

“Sterling is weaker and there is evidence to show that confidence is being affected.”

Generally, there is more uncertainty and instability that people in boardrooms need to be thinking about.

While the U.K. remains in a “very uncertain position,” Fraser said other European powers appear to be stabilizing politicly.

Polls suggest that while a farright, anti-immigration challenger will make gains in German elections on Sunday, Chancellor Angela Merkel is poised for re-election, which Fraser said would pave the way for a new chapter of European co-operation.

“That will be a significant point at which the European Union will seek to re-energize itself, led by two newly elected Franco-German leaders,” he said, referring to the pro-Europe French President Emmanuel Macron, whose domestic popularity has fallen.

“They’ll look at what the agenda will be in terms of eurozone management, how they take on the issues of growth and dynamism in the European Union, and how they are going to restore confidence in the European project in the context of Brexit.”