Cyprus better equipped than most to weather Brexit storm
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 email@example.com