Along with Ireland, Malta and Luxembourg, Cyprus is in the group of countries that stand to lose the most from worsening Britain-EU relations after a Brexit, says Yael Selfin, KPMG’s chief economist in a report.
Selfin argues that this is due to the fact that Cyprus and the other aforementioned countries maintain a negative balance of trade with the UK, that is they import more than they export.
However, for the UK these markets are “almost insignificant”, since the total volume of exports to these countries is minuscule compared to the size of the British economy. On the other hand, for Cyprus and other small states, Britain is an important market and export destination.
Cyprus is among the countries with the highest trading volume in the services sector compared to their GDP, something which also makes it important that Cyprus operates in full cooperation with the United Kingdom after Brexit.
Specifically, Cyprus exports to the United Kingdom £932 million in services, while importing services valued at £616 million pounds. So Cyprus’ export of services to the UK corresponds to 6.6% of Cyprus GDP, while on the other hand, the value of imports is minuscule compared to the British GDP.
It is also noted that the Cypriots who work in Britain correspond to 9.7% of the Cyprus population. This means that any obstacles that arise in the ability of Europeans to work in Britain after the Brexit would create problems for Cyprus, such as the decrease in amounts sent or spent by British Cypriots back in Cyprus.
The analysis of the KPMG economist concludes that each one of the 27 member-states of the EU has different priorities in approaching its future relationship with Britain.
“This means that it remains to be seen whether a mutually agreed stance can be reached between the 27 member states and Britain in the two years of Brexit negotiations. It must be said that most countries have significant bonds with the United Kingdom, whether we are talking about exports of Danish sausages, or sending cash by Latvian migrants, or a tourist market for vacations in Spain”, says Selfin.
“In total, the EU has much to lose from a deterioration in the economic relations with the United Kingdom and if there is the capacity for cooperation on a solution based on economic facts rather than internal politics, many of the potentially negative consequences of Brexit may be evaded”.