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Wednesday, April 21, 2021

Five ways Qatar could be affected by Brexit

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UK and Qatar flags
UK and Qatar flags

On Thursday, Britons will vote in a referendum that decides whether their country will remain in the European Union (EU).

Currently, polls show that the vote could be a close one, and there are strong opinions on both sides.

Leaders of many countries have warned the UK to consider the global implications of a vote to Brexit, including Qatar’s former foreign minister.

The Gulf nation stands to both gain and lose if the UK leaves the EU. Here are five ways it could be affected:

Flight compensation

Travelers flying from the UK to Doha post-Brexit could see a change in their passenger rights if their flights are delayed or cancelled.

London's Heathrow Terminal 5
London’s Heathrow airport

At the moment, EU rules state that passengers on any flight out of an EU airport are entitled to compensation if they are delayed by more than three hours.

For example, a flight from the UK to Doha that’s been delayed for more than four hours would entitle a traveler to a standard €600 (QR2,475) in compensation.

But if the UK left the EU, it’s possible that amount might decrease.

Open skies deal?

In terms of aviation, EU regulations and trade zones also affect Qatar and its national airline.

The UK is an important market for Qatar Airways, which currently flies to four destinations there, and has six daily flights to London’s Heathrow Airport alone.

Additionally, Qatar now holds a significant share in British Airways’ owner International Airlines Group (IAG), as well as a 20 percent stake in Heathrow airport operator BAA.

Photo for illustrative purposes only.
Photo for illustrative purposes only.

At the moment, the UK is a member of the European Common Aviation Area (ECAA), which aims to reduce red tape and encourage shared regulations within its zone.

If the UK votes to leave the EU, it would no longer automatically be a part of the ECAA.

Unless it negotiates otherwise, this means it would not be part of a proposed ECAA EU Open Skies deal with the GCC countries, for which negotiations have just begun.

Such deals aim to create a free market for the aviation industry within the countries where they apply.

According to the European Commission, this potential deal could “offer new business opportunities to the whole aviation sector, and new routes and better fares to passengers.”

Akbar Al Baker
Akbar Al Baker

But if Brexit happens, the UK could always negotiate a separate, bespoke aviation deal with Qatar that the airline finds more beneficial than the status quo.

For now though, neither of the bosses of Qatar Airways or IAG seem to be too concerned about a possible Brexit.

IAG chief executive Willie Walsh recently said that the group did not believe a vote to leave the EU would have “a long-term, material impact” on its business, while Qatar Airways CEO Akbar Al Baker also played it down, saying, “I think the people of Britain will make a decision that is very wise.”

Qatar’s UK investments

In recent years, Qatar has been investing heavily in UK real estate and companies, such as luxury retailer Harrods.

Thus, the UK’s economy post-Brexit would financially affect the Gulf country’s portfolio.

Qatar has used its oil and gas wealth to invest in British realtor Harrods, among other assets.
Qatar has used its oil and gas wealth to invest in British realtor Harrods, among other assets.

Earlier this month, Reuters reported that GCC property investors were holding back on potential deals in the UK until the referendum result was known – and pointed out that property prices were already dropping in some areas as the referendum approached.

The newswire stated that the overall value of residential property in central London areas popular among Gulf investors – like South Kensington and Knightsbridge – fell between 3.5 and 7.5 percent year-on-year in May.

Diplomacy

Analysts are also predicting that a UK exit from the EU could affect the refugee crisis and diplomacy in the Middle East.

Photo for illustrative purposes only.
Photo for illustrative purposes only.

According to Jane Kinninmont, senior research fellow at independent policy institute Chatham House, the UK’s colonial links with the region and its military strength mean it would continue to have strong relationships with GCC nations.

But Brexit could also make British influence “even more patchy” in the region, she added.

This is because Britain would likely only emphasize trade and defense after Brexit, causing other areas of diplomacy to suffer as a result:

“Relations with North Africa could end up being neglected, and the Middle East Peace Process would probably remain on the back burner,” she said.

However, if Britain decides to remain in the EU, this would give the union an opportunity to properly address international issues such as the refugee crisis:

“Europe as a whole has struggled to deal with the recent series of interconnected crises in the Middle East, largely because it has been preoccupied with internal divisions.

If Britain remains, the EU will have more chance of turning its attentions to the multiple emergencies on its borders,” she said.

Trade turmoil

Qatar and the UK are important trading partners.

Bilateral trade between Qatar and the UK is booming, having doubled between February 2011 and March 2015 to £4.4 billion (QR22.9 billion), driven mostly by natural gas sales.

Most analysts believe that Brexit would result in turmoil in the financial markets, and a drop in the value of sterling.

British pound coins
British pound coins

In a recent piece in the Peninsula, analysts at Qatar National Bank (QNB) concluded that the impact of Brexit would “reverberate across different corners of the global economy and financial markets.”

However, a Gulf-based economist argued in Arabian Business that Brexit could also benefit regional economies.

Tim Fox, chief economist and head of research at Emirates NBD, said that a dip in sterling might reduce tourist numbers to the Gulf from the UK, but this could also make investment in the country more attractive for Gulf businesses and individuals.

He also argued that Brexit might allow the UK to forge a new UK-Qatar trade deal independent of the EU, which has been unable to strike an agreement with the GCC, despite negotiations going back to 1988:

“The UK only last month signed a Double Taxation Agreement with the UAE, demonstrating that bilateral deals might actually be preferred and more easily achieved,” he said.

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