After a narrow majority of United Kingdom residents voted last June in the so-called Brexit referendum for their country to leave the European Union (EU), Prime Minister Freundel Stuart’s initial response was that he did not think Barbados should become “too anxious” over the short term because the exit process would probably take about two years.
However, he made clear that “given the close relationship between Barbados and the United Kingdom, our heavy dependence on British tourism, and the fact that we have an international business sector that benefits from British investment as well, we have to wait and see what will happen over the medium to long-term.”
At the same time, Mr Stuart sought, through a Barbados Government Information Service (GIS) release, to assure the country that Government would keep a close eye on the unfolding situation.
“I think we have to monitor the situation and if we are required as a result of reverberations felt here in Barbados to make any adjustments and to adapt to any new realities, we should stand ready to do so.”
Mr Stuart’s comments followed predictions from various commentators that inevitably there would be major Brexit-related fallout for Barbados and the countries of the Commonwealth Caribbean.
The prime minister’s initial wait and see approach was understandable, given the human tendency to fear the worst as an initial reaction. Six months later, however, strong evidence is starting to emerge that Brexit is likely to bite in a significant way.
Immediately after the vote, the president of the Barbados Economics Society, Jeremy Stephen, had predicted that in the short term, the major negative effect would be a lower spend by UK visitors to the island because Brexit’s downward pressure on the value of the pound sterling would cause a decline in the spending power of UK residents.
He explained: “That means the average tourist that comes to Barbados to stay in the latter half of the year would have to spend at least ten per cent more just to enjoy the same level of goods and services . . . . That, coupled with the anticipated slight rise in the price of oil and increase of interest rates towards the latter half of 2016, doesn’t bode well for our economy in terms of foreign reserves.”
Part of Stephen’s prediction has proved correct. While UK visitors have increased over the past six months, their on-island spend has been trending downwards, Sue Springer, the outgoing chief executive officer of the Barbados Hotel and Tourism Association (BHTA), subsequently confirmed.
“The UK visitors seem to be cutting back even though they are still coming . . . but they are cutting back on what they are doing,” she said.
Minister of Tourism Richard Sealy, speaking with Barbados TODAY last month whilst attending the World Travel Market in London, confirmed that the falling value of the pound sterling meant UK tourists would be spending less. Since the Brexit vote, the pound versus the Barbados dollar has fallen from an exchange rate of BDS$3.20 to $2.48.
Last Friday, Barbados TODAY columnist Sir Ron Sanders, a former Antigua and Barbuda high commissioner to London who is that country’s current ambassador to the United States, painted a grim picture of unfolding economic dislocation in the UK over the coming months.
“The Brexit chickens are coming home to roost in a troubled British economy,” he said, calling the referendum decision a “colossal mistake”.
Given Sir Ron’s assessment and Prime Minister Stuart’s assurance that Government intended to monitor the situation, a pertinent question which arises – and needs to be asked — is whether Barbados has come up with a strategy to address the fallout from Brexit, focusing particularly on the eventuality of a worst case scenario.
Tourism is our number one export industry and, given the imperative of maximizing foreign exchange earnings, the decline in the British visitor spend is without question unwelcome news, given the implications as well for Barbados’ own economic recovery efforts.
Barbados’ vulnerability stems from the reality that we are, in effect, a one-legged economy, standing on tourism, with most of our eggs are in one basket. What is the Government’s assessment of the situation six months later? It would be reassuring to hear from the Prime Minister Stuart that serious discussions on the Brexit fallout have taken place at the highest level of Government and what strategy, if any, has been drawn up to ensure that our interests are safeguarded as much as realistically possible.
Our concern is that as a country, we too often find ourselves in the disadvantageous position of reacting to events when, had we simply seized the opportunity to be pro-active, we at least would spare ourselves the trauma of being overwhelmed by events.