Cyprus bet­ter equipped than most to weather Brexit storm

Financial Mirror (Cyprus) - - OPINION - By Michael Do­herty

Di­vorce pro­ceed­ings are never am­i­ca­ble and rarely go smoothly. Bri­tain’s frac­tious ef­forts to ex­tract it­self from the Euro­pean Union shows this di­vorce is no ex­cep­tion.

The fail­ure to reach agree­ment is wor­ry­ing gov­ern­ments and busi­ness lead­ers right across the EU and is of par­tic­u­lar con­cern to Bri­tish ex­pats who plan to con­tinue liv­ing in a mem­ber state of the Union.

How­ever, new re­search sug­gests Cyprus may fare bet­ter than most in the event of a hard Brexit. It comes from the EU’s Com­mit­tee of the Re­gions and is drawn from re­sponses to a huge ques­tion­naire on Brexit sent to of­fi­cials, not just in ev­ery EU coun­try, but in all the re­gions of the big­ger coun­tries.

The UK is Cyprus’ sec­ond big­gest trad­ing part­ner and the big­gest for ser­vices and in­vest­ment, so Brexit is not to be treated lightly. Nev­er­the­less, it is clear from this sur­vey that the na­ture of trade be­tween the coun­tries leaves Cyprus less ex­posed than many of its EU part­ners.

Ire­land, be­cause of its ex­ten­sive and deep eco­nomic links to the UK, is the most vul­ner­a­ble coun­try, but many EU re­gions have spe­cific fears of their own.

In the Nether­lands, the prov­ince of Gronin­gen in the north is con­cerned be­cause of its re­liance on trade in nat­u­ral gas with the UK. Of­fi­cials in Mur­cia, in the south­east of Spain, warned Bri­tain is the sec­ond most i mpor­tant des­ti­na­tion for ex­ports “with the agri-food in­dus­try be­ing the most im­por­tant, send­ing 75% of its ex­ports to the UK”.

A no-deal Brexit is feared by the Flan­ders re­gion of Bel­gium, where of­fi­cials have cau­tioned: “A hard Brexit will lead to 42,000 job losses, whereas a trade agree­ment could limit these to 10,000 jobs”. They also warned that “the Flem­ish road trans­port sec­tor ... will be very hard hit due to changes in cus­toms, free move­ment of peo­ple, po­ten­tially de­vi­at­ing rules on health and safety, etc”.

The Hauts-de-France re­gion, in the north of that coun­try (where Pres­i­dent Macron was born), is wor­ried on be­half of the car­maker Toy­ota, which op­er­ates there. Its of­fi­cials say 13% of Yaris ex­ports in 2016 went to the UK.

The rel­a­tively ho­mo­ge­neous na­ture of the Cyprus econ­omy means it is not sub­ject to this sort of re­gional vari­a­tion. Tourism could be hit, of course, but no­body be­lieves a se­ri­ous de­cline is likely, cer­tainly not in the long term. And re­cent moves by the Cyprus gov­ern­ment have a gone a long way to eas­ing the fears of Bri­tish ex­pats on the is­land, who form an im­por­tant part of the eco­nomic bond be­tween the two coun­tries.

Bri­tons who have been con­tin­u­ously res­i­dent for five years in Cyprus are now as­sured of res­i­dency rights and, in ef­fect, the con­ces­sion will ap­ply to any Bri­tish fam­i­lies who ar­rive be­fore the 2020 Brexit dead­line and stay for at least five years.

This is as good for the Cyprus econ­omy as it is for the ex­pat Brits and is typ­i­cal of the care­ful and con­sid­ered way the Cyprus gov­ern­ment has ap­proached Brexit.

While all this is re­as­sur­ing, we must not un­der-es­ti­mate the dan­gers Brexit poses for Cyprus. A sound trade agree­ment is es­sen­tial for a healthy Cypriot econ­omy. Any block­ages in trade, for­eign ex­change trad­ing or for­eign in­vest­ment could have long-term reper­cus­sions.

There is also the is­sue of the 7,000 Cypriot cit­i­zens who work on Bri­tish mil­i­tary bases on the is­land. Any deal bro­kered be­tween the Repub­lic of Cyprus and the UK will have to take their needs into ac­count.

In ad­di­tion, there are con­cerns about the sta­tus of Cypriot cit­i­zens in the UK. The EU has said it will ac­cept an ac­cord be­tween Cyprus and the UK, but it must be com­pat­i­ble with Euro­pean Union reg­u­la­tions.

These are not is­sues to be lightly dis­missed but com­pared to the prob­lems fac­ing Ire­land, or, most par­tic­u­larly Bri­tain it­self, thank­fully they are mat­ters about which we can be rea­son­ably re­laxed. Michael Do­herty is CEO of the Wood­brook Group in Li­mas­sol. Tel: +357 25272820 www.wood­brook­group.com con­tact@wood­brook­group.com

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