In 24 days’ time, the British will decide whether to end their 43-year relationship with the European Economic Community, as the EU was known back when the UK joined in 1973.
Malta, Ireland, Belgium, The Netherlands, Cyprus and Luxembourg have been named as the countries that would be the most badly hit by a so-called Brexit.
Analysts point to a potential recession in the UK, consequent depreciation of the sterling, a decline in UK consumers’ purchasing power and in the value of investments in the UK.
They see Malta as being exposed to these shocks due to its dependence on tourism and investment in the UK by financial institutions operating in Malta.
Economist Gordon Cordina believes a Brexit should be avoided but if it did materialise, he does not expect major impacts on the Maltese economy.
This is for the same reasons that the 2008 financial crisis failed to impact the Maltese economy directly through its financial sector.
When it comes to tourism, a drop in purchasing power of sterling could affect demand but it could also entail a shift away from longer haul destinations to ones which are cheaper and more accessible. Malta could actually benefit from such trends.
How might the exchange rate affect the all-important British tourism to Malta?
For another economist, Philip von Brockdorff, in the unlikely event the ‘leave’ vote wins, it would not be the end of the world for the UK. It would adapt and seek separate trade agreements with the EU, China, the US and emerging economies, he said, adding that he was more concerned about the implications for the EU and its future as an economic and political bloc.
How might the exchange rate affect the all-important British tourism to Malta?
The value of the British pound relative to the euro depends on several factors, including foreign direct investment in the UK.
It is difficult to predict whether sterling would fall, although one would expect a period of uncertainty depending on the timeframe for free-trade negotiations with the EU, Dr von Brockdorff said.
Assuming there is less investment in the period leading to an agreement, a lower demand for sterling would weaken its value relative to the euro. This means UK tourists travelling to Malta would need to pay more for the euros they need.
Expressing doubts on whether this would last long, Dr von Brockdorff noted that one could not ignore the challenges facing the euro area as it struggles to emerge from the post-2008 financial crisis. Besides, the pound could become a safe haven like the Swiss franc, and gain whenever the euro area was doubtful.
Would duty be charged for online purchases? And would it become more expensive to import cars from the UK?
This would depend on trade negotiations with the UK. Dr von Brockdorff believes common sense would prevail and free trade between the UK and EU would remain, as in the case of Switzerland, which has a free trade agreement with the EU.
In the interim, exports from the UK may face restrictions but these are likely to be temporary.
Since the EU sells to the UK far more than what it buys from the UK, it would not be in the EU’s interests to impose tariffs even if it could, as the UK could impose similar tariffs on the goods the EU sells to the UK, he said.
Meanwhile, James Zammit of Zammit holdings, who has just returned from a UK conference for car dealers called CDX16, noted that the feeling among people involved in the car industry was that Brexit will not happen.
Will Malta’s VAT exemptions on food and medicine hang in the balance?
A Brexit would not mean that Malta would automatically lose the zero rate VAT on foodstuffs and medicinal products which it had negotiated and won prior to joining the EU, former European Commissioner Joe Borg says.
The concession had been granted to the UK in the 1990s. It was made clear to Malta that it could only retain the concession as long as the UK and Ireland enjoyed it. The EU could, however, decide to revisit VAT exemptions for all countries, as other member states have their own tailor-made concessions.
Naturally, it would be of comfort to negotiate the exemption with another member state by our side (in this case the UK), but even in the case of a Brexit, Malta could still argue that this VAT exemption is essential.
Could medical care agreements between Malta and the UK be affected?
It is unlikely that a Brexit would affect the patient-exchange agreement in place for 30 years, according to Martin Balzan, general secretary of the Medical Association of Malta.The agreement might have to be renegotiated however, he added.
Still, a Brexit could affect the freedom of movement of people, making it harder for those seeking medical training in the UK.
Dr Balzan explained that Malta’s qualifications and system are similar to those of the UK. However, before Malta’s accession, it was much more difficult for medical professionals to find a job there because of migration bureaucracy, which could be reintroduced with a Brexit.
Meanwhile, the University of Malta would be able to charge tuition fees to UK nationals, while to date a significant number enrol without payment.
What about those receiving a British pension?
While pension rights should remain unchanged, the exchange value of the currency could change.
Dr von Brockdorff noted that a weak British pound would increase the cost of living for those heavily reliant on a UK pension or income.