Britain Pulling Out Of Europe Could Affect Canadian Economy.
June 21, 2016
It may seem unthinkable that a foreign country considering to leave the European Union could have any affect on Canadians but the impact it will have is undeniable.
Last week the Canadian dollar, stocks and oil drooped as polls showed Brexit increasingly likely. Yesterday markets surged after reports it was leaning the other way.
The BBC radio show Dead Ringers has been having a grand time, playing up the conflict between conservative old-timers who want to keep Britain British and the youngsters who don't care and won't vote.
British pollster Peter Kellner in an opinion piece said on Thursday "Anybody who says they know for sure how Britain will vote next week is either a fool or a liar, and possibly both"
Fear of a British departure from Europe has already hurt Canadians. Market traders are making profits by gambling on the sudden rise and fall in the loonie, commodities and stocks.
Fear of single events that cause volatility is by definition short-term. The theory goes that once the vote has happened, Canadian markets will readjust to the new reality. But the potential wider impact of Brexit on the Canadian economy is very real. Bank of Canada governor Stephen Poloz has warned that unexpected global events can destabilize a weakened Canadian economy, like a cracked tree in your backyard. "If the right storm comes along and knocks it onto your neighbour's house, you've got a problem," said Poloz.
Line ups of Canadians warning of the impact a Brexit could have on Canadas trade was joined by Canada's leading diplomat in Britain, High Commissioner Gordon Campbell,
Campbell warned that Brexit would cause a "generational impact" on the world's economies, wiping out thousands of Canadian jobs and possibly wrecking the Canada-EU trade deal.
Mark Carney the Canadian head of Britain's central bank, says a vote for separation from Europe would lead to recession. Canada has close business ties with Britain, with cross-ownership of companies and direct and indirect investment in each other's countries. Britain has used Canada as a jumping-off point for the United States. Even more so, Canada uses Britain as a convenient bridge to Europe. Canadian financial companies and law firms are embedded in the City of London, currently the financial hub for European bond trading, mergers and acquisitions, derivative, currency trading and stock issues. It remains completely uncertain how withdrawing from Europe would affect that financial community. Indeed, it may be in Europe's interests to keep the City of London thriving.
In a globalized world, there is no reason Canadian companies dealing with Europe could not reorganize their links, bypassing London where necessary, even retaining the English-language advantage by moving to Ireland, which remains a firm EU member.
But such reorganizations are expensive. Dealing with different rules in Britain and Europe would be a step backward, increasing administrative costs. Perhaps worse, the withdrawal of Britain could have wider implications for the entire continent.
Maybe this time the polls are right and none of us has anything to worry about. We will just have to see in the coming days. Voters are set to hit the polls Thursday June 23
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