Cyprus Mail

Businesses concerned over potential Brexit effects

Keve's Phidias Pilides

The chamber of commerce and industry (KEVE) expects negative effects on Cyprus by the UK’s decision to leave the European Union, despite any corrections in the next few months.

KEVE chairman Phidias Pilides said important sectors of the economy would be affected while Cyprus lost an ally in the EU in relation with negotiations on a unified tax rate, which the island’s rejects.

«We will monitor the effects on a daily basis and what is being discussed so that we can react promptly on behalf of our members,” he said.

Pilides said KEVE was concerned over the effects of a UK exit and was already seeing the first market reactions and the Sterling’s exchange rate.

There may be a correction in the next few days or months but the effect will certainly be negative, he said.

“From then on we must examine exactly what happens to react correctly, that is, what Britain’s relation would be with the EU, whether it will be simply a third country, or if arrangements will be made to be a member of the single market,” Pilides said. “It is premature to assess what the effects will be.”

He said it would take a long time to discuss the details of the so-called Brexit but in the midterm, it was expected that tourist arrivals and exporters would be affected due to the exchange rate.

Pilides said Cyprus and Britain supported EU policies that gave more independence to member states.

“We are concerned about Cyprus’ ability to negotiate on its own in the EU without the support of the UK,” he said, adding that the two countries agreed on many financial matters, including the special tax regime.

The employers and industrialists’ federation, OEV, called on the government to act fast and decisively to secure the country’s interests and mitigate potential effects to the economy.

“The interests of the Cypriot economy and Cypriot businesses must be secured in the best possible manner,” OEV said.

The organization has written to the finance minister asking for a meeting of all stakeholders to examine the possible effects and the next steps.

Economist and former banker Marios Clerides said Cyprus will have to actively participate in the UK-EU exit talks in order to safeguard its agricultural exports, including halloumi, the Cypriot export champion.

As Cyprus is still in the process of obtaining a protected designation of origin status for halloumi and the UK raised an issue in the past, “now that the UK will not be in the EU we have to protect it in the new environment,” Clerides, who chairs the Cyprus economic society said in a telephone interview.

In 2015, Cyprus exported €120mln worth of goods to the UK against 450mln in imports.

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