Impact of Brexit on Singapore: A Detailed Analysis of Key Sectors

This essay explores the multifaceted effects of Brexit on Singapore's economy. It begins by highlighting the initial shockwaves of the UK's departure from the European Union and its immediate impact on global economies. The analysis focuses on key areas such as the financial market, where the Straits Times Index experienced a downturn, and Singapore's exporters faced challenges due to the devaluation of the Pound Sterling. Furthermore, the essay discusses the impact on investment flows, particularly foreign direct investment (FDI), noting the uncertainties created by Brexit and the potential reduction in investments from both the UK and the EU. The tourism sector is also examined, revealing a shift in travel patterns with increased demand for travel to the UK due to the weakened Pound. The essay concludes that while the long-term effects of Brexit remain uncertain, Singapore must adapt to new trade policies and readdress its global relationships to navigate the changing economic landscape, with the essay available for students on Desklib, a platform providing past papers and solved assignments.

Running Head: EFFECTS OF BREXIT ON SINGAPORE 0
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Effects of Brexit on Singapore

EFFECTS OF BREXIT ON SINGAPORE 1
Table of Contents
INTRODUCTION......................................................................................................................2
IMPACT ON FINANCIAL MARKET.....................................................................................2
IMPACT ON INVESTMENT FLOWS.....................................................................................3
IMPACT ON TOURISM...........................................................................................................4
CONCLUSION..........................................................................................................................5
References..................................................................................................................................6

EFFECTS OF BREXIT ON SINGAPORE 2
INTRODUCTION
The step of Britain to be separate from the European Union was a shocking situation for all
the nations. This also had a marginal impact on the global economy, which will create several
unbalances. In addition, the Brexit already had shown an immediate impact on its European
associates and related nations of the European Union (Hunt & Wheeler, 2018).
The results of separation can be seen easily when the UK economy had been slowed down
after the Brexit Referendum. In addition, around £25 billion was added into the Autumn
Budget for the support of the business in the Britain. The economy of Britain also takes a
downturn when it negatively rose to 1.5 per cent from the previous estimate of 2 per cent
(Chu, 2018).
This European Referendum had created the situation of disaster in several sectors of the
industry over the world. Majorly this created a bad impact over Britain in terms of its
reputation in the world but according to various economists, the result came as a short-term
outcome as no one can perceive its long-term proposition over the economy and the world.
One of the largest trading partners of the United Kingdom, i.e. Singapore holds for half of the
exports in the UK (around £5.6 billion) to the Association of Southeast Asian Nation (Teo, et
al., 2009). This shows that the United Kingdom does heavy investment in the Singapore
including total foreign direct investment exceeding £30 billion.
The separation of one of the dominant country like Britain from the European Union was
unexpected and this lead to creating an unstable political system in the foreign exchange
markets, which constitute opposite to their demand. The vote of Britain for the Brexit also
leads to the decline in the value of the pound against various dominant currencies like Yen
and Dollars.
It cannot be estimated that how Brexit will help Britain and whether the single market will be
effective in the future for Britain, or there will be any new trade policy or contracts with the
other countries. However, it can be analysed through a hint that the “Hard Brexit” will be
proved beneficial for the poor people in Britain (Blyth, 2016). However, opposite to the fact,
the negative impact will come in the face of the high cost of investment and trade between
the nations.
Therefore, it can be analysed that Brexit comes with various threats to the international
market but the opportunity will lie with Britain in the form of making of new relations with
trade or renegotiation of old trade agreements. This all depends upon the long-term
agreements and contracts made with the new countries over the globe.
IMPACT ON FINANCIAL MARKET
A financial market is a place where financial products such as shares, bonds and mutual funds
are to be sale or purchase. It is further divided into several others market like primary and

EFFECTS OF BREXIT ON SINGAPORE 3
secondary, the stock market, equity market, bond market and money market (Harwood, et al.,
2010).
Brexit has a short-term impact majorly on the financial markets, rather than the economies
and the major concern for all should not be the impact of Brexit on stock market and
currencies (Irwin, 2016).
In Singapore, the equity market took a serious downturn because of the Brexit referendum as
the STI (Straits Times Index) was reached down by 2.1% when the voting was done in the
referendum (Lim, 2018). This index serves as a benchmark for the whole Singapore stock
market and shows the performance of the topmost 30 companies listed on the Singapore
Exchange. It also changed the history as it was called to be as strongest against the pound.
The exporters of Singapore having strong relations with the markets of UK were also affected
by the devaluation of the Pound Sterling (Stefanova, 2016). Comparing to most of the
European cities (such as Frankfurt and Paris), London has high market capitalization and due
to this called to be a financial capital of Europe but the future can be changed anytime.
With the support of Europe’s financial capital, the financial standards of others European
cities will be harmonized which will affect the financial market of Singapore due to the
Strength of the Singdollar against the GBP.
In addition, the revenue and fees of banks will be affected when the organizations will not
depend on the foreign exchange services because of the fewer exports.
Therefore, the result of Brexit Referendum was a turning point for the EU and UK and
because of this, for the next few years, economic uncertainty added with the cause of critical
outcomes.
IMPACT ON INVESTMENT FLOWS
FDI (Foreign Direct Investment) includes a direct investment into a business or production
within the personal capacity by an organization and individual into another businesses or
company with the controlling interest in a foreign company (Moon, 2015).
FDI leads to increases in productivity, most of the countries allow and welcome it so that the
output can be increased which result in the rise in the wages. One of the major recipients of
FDI is Singapore (Mottaleb & Kalirajan, 2010).
For the long-term perspective, one of the biggest uncertainty was that whether the Other
European nations will be with Britain and leave the EU, which is Singapore’s second-largest
trading partner after China.
In the Asia Pacific region, the largest trading partner of UK’s is Singapore. This governing
commercial relationship is due to an agreement which was signed on 22nd of July, 1975
relating to protection and promotion of investment.’

EFFECTS OF BREXIT ON SINGAPORE 4
Before the happening of the referendum, any type of investment made in Britain comes with
various opportunities, growth and expansion and this all come in a single European Market.
This could help Britain to be more developed and flourished the nation of the world.
With the vote in the referendum, the financial markets have to go through various changes
like fluctuations in the exchange rates, affecting the pound sterling value and thus cause
major disruptions in the investment flows. This affected the overall business environment and
the increasing gap in accessibility with the EU market will cause more troubles.
The depreciation in the Pound Sterling has also created a suspicious situation for many
Singapore companies who wanted to invest in the UK, as this will affect directly on their
profitability. According to the Mills, Chief Executive of the Singapore International Chamber
of Commerce, states that until and unless the Brexit new terms of Britain will not be shown
clearly, the volatility will be continued.
Around 25% of the whole FDI portfolio in Singapore rolls in from the European Union. In
addition, many investments were made by the UK inside the European Union (EU).
Therefore, the referendum of Brexit will directly cause with the lesser investment in
Singapore from both the European Union and the UK (Oliver & Williams, 2016). Therefore,
the British firms will face difficulty in expanding their business due to the lower profits and
higher costs in Singapore.
In addition, many economists think that if British companies started pulling back their
investment in trade and production because of their weaker pound, then the overall Singapore
economy will be affected.
IMPACT ON TOURISM
For any country, one of the major sources of revenue is Tourism. In Singapore, this is one of
the constant growing sectors over a number of years. In addition, against the Singapore
Dollar, the Britain Pound is continuously falling. After the Brexit referendum, the pound
sterling is weakening on a continuous basis against the Singapore Dollar and this leading to
the creation of the strong demand for travel to the UK.
Around 30 per cent of the total tourist in the UK comes from the European Union (Calder,
2016). However, the referendum of Brexit leads to a decrease in the value of Pound and this
result in the less amount of inbound tourists from the UK as per the statement by the CEO of
TripZilla.com. Other travel booking companies like Wego.com also has the same view
towards it and they stated that after Brexit, there is more amount of tourists coming to the
United Kingdom. So, Tourism proved to be another sector that receives a boost after the post-
Brexit referendum.
In addition, a Singapore based travel booking company named Chan Brothers Travel, also
stated that they have analysed the increase in demand for travel to the United Kingdom by 30
per cent.

EFFECTS OF BREXIT ON SINGAPORE 5
This shows that the dollar of Singapore is strong and makes travelling cheaper in the UK
whereas the inbound tourists into Singapore from the UK will be less due to the weak Pound
Sterling.
CONCLUSION
The Brexit Referendum leads to many changes and consequences in the terms of policies,
economy and relations. However, exact specifications and future outcomes are not known
and so, the long-term impact cannot be analysed. This referendum also has a broader aspect
and results, which cannot be generally perceived. In addition, the problem will occur for
those countries who mainly depend on the UK for their business, as they now have to adopt
separate trade policies for both nations i.e. one for the European Union as a whole and other
for the UK specifically. Therefore, the UK must focus on readdressing its global relationships
in this continuously changing of the world order.
From Singapore perspective, Brexit neither comes with doom, not with gloom but the impact
of Brexit cannot be analysed in a short-term period.

EFFECTS OF BREXIT ON SINGAPORE 6
References
Blyth, M., 2016. After the Brits Have Gone and the Trumpets Have Sounded: Turning a
Drama into a Crisis That Will Not Go to Waste. Intereconomics, 51(6), pp. 324-331.
Calder, S., 2016. HOW BREXIT WILL AFFECT BRITISH TOURISM. [Online]
Available at: https://www.independent.co.uk/travel/news-and-advice/brexit-british-tourism-
impact-eu-referendum-a7066371.html
[Accessed 19 08 2018].
Chu, B., 2018. One year to Brexit: How well has the British economy really been
performing? And what can we expect next?. [Online]
Available at: https://www.independent.co.uk/news/business/analysis-and-features/brexit-uk-
economy-one-year-gdp-inflation-investment-growth-a8270861.html
[Accessed 19 08 2018].
Harwood, A., Litan, R. E. & Pomerleano, M., 2010. Financial Markets and Development:
The Crisis in Emerging Markets. Washington: Brookings Institution Press.
Hunt, A. & Wheeler, B., 2018. Brexit: All you need to know about the UK leaving the EU.
[Online]
Available at: https://www.bbc.com/news/uk-politics-32810887
[Accessed 19 08 2018].
Irwin, N., 2016. How ‘Brexit’ Will Affect the Global Economy, Now and Later. [Online]
Available at: https://www.nytimes.com/2016/06/25/upshot/how-brexit-will-affect-the-global-
economy-now-and-later.html
[Accessed 19 08 2018].
Lim, K., 2018. Singapore shares decline at Monday's open; STI down 0.68% to 3,334.04.
[Online]
Available at: https://www.straitstimes.com/business/companies-markets/singapore-shares-
decline-at-mondays-open-sti-down-068-to-333404
[Accessed 19 08 2018].
Moon, H. C., 2015. Foreign Direct Investment: A Global Perspective. Singapore: World
Scientific.
Mottaleb, K. . A. & Kalirajan, K., 2010. eterminants of foreign direct investment in
developing countries: A comparative analysis. Margin: The Journal of Applied Economic
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Oliver, T. & Williams, M. J., 2016. Special relationships in flux: Brexit and the future of the
US–EU and US–UK relationships. International Affairs, 92(3), pp. 547-567.
Stefanova, K., 2016. The Rise And Fall Of The British Pound. [Online]
Available at: https://www.forbes.com/sites/katinastefanova/2016/10/30/the-rise-and-fall-of-
the-british-pound/
[Accessed 19 08 2018].

EFFECTS OF BREXIT ON SINGAPORE 7
Teo, T. S., Lin, S. & Lai, K.-h., 2009. Adopters and non-adopters of e-procurement in
Singapore: An empirical study. Omega, 37(5), pp. 972-987.