You can’t escape the news at the moment that Greece is in financial trouble. Even with the best financial support packages the country will still be in trouble. One of the biggest problems for the country is that their current leader isn’t pro Eurozone. And since his announcement of a referendum and the subsequent comprehensive rejection by the Greek people of the “humiliating” terms set by Europe, there are many of those in the Eurozone who aren’t too fond of him either.
This is a risky gamble for Greek Prime Minister, Alexis Tsipras. His predecessor lost his job because of a similar move and it has long been thought that Greece was the soft spot of the Euro.
But, if Greece does pull out (or now forced out) of the Eurozone, what will be the impact for British business? Should we panic or would we ride out the crisis unharmed?
Tougher Times For Britain On The Continent
UK manufacturing and services don’t export much to Greece; the contribution to our economy is only about £920 million. However, Athens leaving the Euro behind and adopting a new currency or readopting an old one will impact confidence in the Euro and the continent system as a whole.
Europe accounts for about 50% of Britain’s exports. The weakness of the Euro relative to sterling means that goods produced in Britain are expensive on the continent. If Greece does exit the Euro, the value of the single currency would drop again and global markets would lose further confidence in it. This, in turn, would make the pound stronger against the currency, making British goods even more expensive to European consumers.
Technically speaking this isn’t such a problem for the UK. Unlike other members of the Eurozone, the UK banks have kept their cash in their pockets and haven’t loaned too much out to Greece when they were asked for it. That isn’t to say that a lot of money won’t be lost; just that there are other countries, for example France and Germany who stand to lose a lot more.
To put it in perspective – the UK provided £1.72 billion in support while Germany and France put in a combined total of £70 billion.
If Greece does or doesn’t leave the Euro, there will still be concerns of when or how this money is going to be collected. If Greece is not going to be able to pay, British banks will want to recoup their losses in other ways. This could mean higher banking fees, requests for loans to be paid down faster or higher interest rates for loans. All of this affects the money in British business’ and customer’s pockets.
Tourism In Britain
The UK’s tourism industry is worth over £115 billion and is the third largest export in the country. Most of the tourists to the UK are from France and Germany. And other Euro nations contribute significantly to the tourism trade, especially in London.
If the pound were to strengthen further relative to the Euro, then citizens of Euro states would probably consider other destinations for their holidays. This could have a massive impact on heritage sites like the Tower of London, Buckingham Palace and the Natural History Museum which are all popular tourist locations. Local businesses will also feel the pinch as footfall and revenues will go down.
This could then threaten the livelihoods of 2.9 million employees within the UK. According to some statistics, 1 out of every 12 people are directly or indirectly employed in tourism within the UK and we have the 5th largest tourist economy in the world. Preserving it is a hugely important part of Britain’s financial future.
The next move for Greece isn’t just about the Eurozone. It is about every country and how their financial decisions will impact on us all. Now that Grexit is a very real possibility talk to Tectona Partnership for financial analysis and guidance and how to mitigate the effects on your business.