A week after residents of the United Kingdom voted to leave the European Union (EU), the long-term ramifications of that decision continue to be the subject of much analysis and speculation on how the process will actually work.
CalChamber Comment
Allan Zaremberg, president and CEO of the California Chamber of Commerce, identified the issues California faces following the Brexit vote:
“California has a lot at stake,” said Zaremberg. “We are the sixth largest economy in the world and a major trading and investment state, and no one in California can be immune from dramatic changes in the international economic structure.
“In order to mitigate the uncertainty and instability, the exit, which requires approval by Parliament and the EU, must be orderly and consider the global consequences. The Trans-Atlantic relationship is one of the most important in the world, and the United Kingdom is one of the most valued trade and investment partners for our country and state.
“This will probably make America and the dollar safe havens for international investments, which unfortunately could make California exports more expensive. California tourism also could take a hit if less favorable exchange rates cause travelers from the UK or the EU to curtail spending or avoid visiting the state.
“Finally, because of California’s reliance on the income tax, market volatility can put the government’s revenues at risk, and that is one more reason to have an orderly transition.”
The Vote
BBC News reported that the June 23 referendum on whether the UK should leave or stay in the EU resulted in a 52% to 48% vote in favor of leaving. The turnout was 71.8% with more than 30 million people voting, the highest turnout in a UK-wide vote since the 1992 general election, according to BBC.
Within the UK, there was division: England voted 53.4% to 46.6% for Brexit. Wales also favored leaving, 52.5% to 47.5%
Scotland and Northern Ireland both voted in favor of remaining in the EU—62% to 38% in Scotland and 55.8% to 44.2% in Northern Ireland.
To begin the legal process of leaving the EU, British Prime Minister David Cameron or his successor (Cameron said he will resign in the fall) must invoke Article 50 of the Lisbon Treaty of 2007. The UK will have two years to negotiate the terms of its withdrawal.
UK Trade Stats
Two-way trade between the United States and the United Kingdom was $114 billion in 2015, and the UK was the fifth largest importer of U.S. goods with a total value of $56.3 billion, according to the U.S. Department of Commerce.
The United Kingdom is California’s 10th largest export destination, with more than $5 billion in exports in 2015. Computer and electronics products accounted for approximately 26.5% of exports—more than $1.3 billion. Transportation equipment brought in $667 million, or 13%, while both chemicals and nonelectrical machinery each accounted for approximately 8.5% of the total, with more than $436 million in exports each.
In 2015, California imports from the United Kingdom were approximately $4.5 billion, with top categories being transportation and computers.
European Union Trade Stats
The UK is the entry market into the European market for more than 41,000 U.S. exporters.
Total bilateral trade between the European Union and the United States was $698.7 billion in 2015, with the United States exporting $272 billion worth of goods to the 28 EU member nations.
California exports to the European Union totaled $29.2 billion in 2015. California is the top exporting state to Europe. Computers, electronic products, chemicals, miscellaneous manufactured commodities, and transportation equipment are the state’s leading export sectors to the region. European Union countries purchase 17.6% of all California exports.
Investment
According to the U.S. Department of Commerce, the U.S.-UK investment relationship is the largest in the world, valued at more than $1 trillion in 2014 and creating more than 2 million jobs, about 1 million in each country. British investment is specifically vast in California, where it supports approximately 90,000 jobs in the state, according to the British Consulate General.
The CalChamber supports expansion of international trade and investment, fair and equitable market access for California products abroad, and elimination of disincentives that impede the international competitiveness of California business.
Tourism
According to an October 2015 report by Visit California, 686,000 people visited California from the UK (California’s second largest overseas market) in 2014, spending $905 million.
UK visitors to California during 2014 reported spending $121 per day during a 10.9 night average stay or approximately $1,319 per visitor. The average spending for all overseas visitors to California was about $1,872 ($153 per day; 12.2 nights in California).
France and Germany are California’s fifth and sixth largest source of overseas visitors. In 2014, 445,000 French travelers and 439,000 German travelers came to California, accounting for $786 million and $720 million in spending, respectively.
The average spending per trip was $1,765 for the French travelers and $1,641 for the German visitors.
