Fear of extended uncertainty underlies Israeli Brexit concerns

UK PM Cameron warns vote to leave EU would jeopardize Britain's economy, leaving fewer jobs and higher prices.

By NIV ELIS, REUTERS
Updated: JUNE 22, 2016 10:02
A WOMAN hands out leaflets last month, campaigning to stay in Europe for the Brexit vote, in London. (photo credit: REUTERS)
A WOMAN hands out leaflets last month, campaigning to stay in Europe for the Brexit vote, in London.
(photo credit: REUTERS)
Israeli businesses are not just concerned about the immediate economic repercussions of a Brexit vote on Thursday.
If the UK referendum tips toward leaving the European Union, many see years of uncertainty throwing a wrench in some economic dealings.
Most economists predict that the immediate aftermath of a Brexit vote would be sharp, cutting into economic growth and weakening the pound.
“If I speak to colleagues involved in property at the moment, they’ll tell you absolutely nothing is happening, because they’re worried the pound will plunge, the stock market will tumble, so nobody wants them to leave,” said Simon Jaffa, a partner at Barnea and Co. law firm.
The day after a “Leave” vote, however, would open a two year process of the UK renegotiating its trade terms with the EU, not to mention all the countries that trade with the UK under current EU arrangements.
“What I think is clear is that you will have a period of time, possibly two years, of uncertainty, and any environment of uncertainty is not good for business,” said Jaffa. “People don’t like investment if they don’t know what, for example,the currency will be.”
Some analysts believe that it will take even longer than two years to renegotiate trade deals.
One major point of concern is for financial institutions. Under the current arrangements, financial institutions based in London that comport with the local regulations are able to “passport” their regulatory approval, allowing them to easily set up shop in other parts of Europe.
“Israeli companies with European headquarters in London will have to start giving consideration as to whether they want to stay there after a Brexit,” Jaffa said.
“To pinpoint exactly what the consequences are is impossible, because nobody knows what the terms will be.”
Ronen Menachem, an economist at Mizrahi Bank agrees.
“The banks and part of the capital markets here in Israel will be influenced should there be a Brexit because of the hesitation of economic and financial investors when they don’t know where the economy is going,” he said.
Few of his fellow economists, he added, were hoping for a Brexit “because almost every section of the economy will have something to lose.
“People are looking for stability right now.”
Some, however, see the Israeli- British relationship as too strong to be seriously affected in the long term.
“Most Israeli business are doing business with the UK because of the UK, and not because of the European Union,” said Anita Leviant, president of the Israel- UK Chamber of Commerce.
“I’m confident that relations between the UK and Israel will continue to grow.”
Even unfortunate economic events can produce some opportunities, Jaffa added. If the pound plummets and stocks fall along with it, it could prove to be a good buying opportunity.
“This could be a potential time to come to the UK, which is normally perceived as expensive, and now it will be cheaper,” he said.
On Tuesday, as polls indicated the outcome was too close to call, Prime Minister David Cameron made a dramatic last-minute appeal to voters to stay in the EU.
In a rare televised address outside 10 Downing St., Cameron repeated his message that leaving the EU would jeopardize Britain’s economy and national security, with fewer jobs and higher prices.
“Brits don’t quit,” he said, using the official backdrop to make a direct pitch to older voters considered more “Euroskeptic” and more likely to vote.
Arron Banks, a multi-millionaire insurance tycoon who is funding one of the “Leave” campaigns, said on Twitter: “Cameron is panicked, it’s out of his hands now.”
As each side sought to play its last trump cards, the pro-EU “Britain Stronger in Europe” campaign issued a final poster of a door leading into a dark void with the slogan: “Leave and there’s no going back.”
The “Out” campaign says it is the anti-establishment choice, and its message that EU membership has handed political control to Brussels and fueled mass immigration appears to have struck a chord with many Britons.
That issue again gained prominence when Cameron’s former close aide Steve Hilton said civil servants had explicitly told the prime minister four years ago that his target to cut net immigration to the tens of thousands was unachievable because of the free movement demanded by the EU.
“There are good ways of controlling immigration... but pulling out of the single market, wrecking our economy, that is a bad way,” Cameron said on ITV’s Lorraine program.
The “Remain” camp has focused mostly on the economic benefits of EU membership and the risks posed by leaving.
Pro-EU leaders, including former prime ministers Tony Blair and John Major, have warned that an exit could also trigger the breakup of the UK by prompting another Scottish independence vote if England pulled Scotland out of the EU.