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Brexit may hit sheepmeat exports, tourism

NZ NewswireNZ Newswire 27/06/2016 Jonathan Underhill

New Zealand's sheepmeat exports and tourists from the UK may be the hardest hit from the Brexit with the most immediate impact likely to be on British tourists suddenly finding the spending power of the pound against the kiwi is the weakest in almost three years.

The European Union is the biggest market for New Zealand sheepmeat, taking $1.4 billion of product last year and almost half of that 228,000 tonnes of quota is taken by the UK. Total red meat exports to the EU amount to $2b, making it the single most valuable market.

However, the biggest impact for New Zealand would be the UK's loss of zero-tariff access for its own sheepmeat into Europe, where it currently sends 90 per cent of production, leaving more in its domestic market.

But no immediate disruption to trade is expected. Trade Minister Todd McClay, who is seeking meetings with trade ministers from the UK and the EU at the G20 meeting in Shanghai on July 9-10, says negotiations between the UK and EU member states to leave the regional trade bloc could take two years and commentators are "suggesting that a final Brexit could be five or six years away."

A more immediate impact may be felt by the tourism sector, given the British pound's slump against the kiwi. The British pound is currently buying NZ$1.89, down from about NZ$2.07 early on Friday NZ time. That means a British tourist has lost 17 cents of spending power per pound in just four days.

For New Zealand, "the real economy impacts (are limited) but probably negative for meat exporters and tourism operators at the margin," said Stephen Toplis, head of research at Bank of New Zealand.

"Commodity prices (are) under pressure, except gold lifting as it's seen as a safe haven."

The weak pound against the kiwi dollar will have little immediate impact for commodities sold on long-term contract or for meat exports in particular, given how far through the current season is.

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