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Poland Looks Eastwards as Brexit Consequences Begin to Hit Home

Amid fears that it is certain to be among the countries hardest hit by the UK's recent decision to rescind its membership of the European Union, Poland is hoping that its growing trade ties with China might help make up any real shortfall.

Photo: Will the post-Brexit UK shut its borders to Polish business? (Shutterstock.com/1000 Words)
Will the post-Brexit UK shut its borders to Polish business?
Photo: Will the post-Brexit UK shut its borders to Polish business? (Shutterstock.com/1000 Words)
Will the post-Brexit UK shut its borders to Polish business?

With the wider implications of the UK's decision to quit the EU still reverberating around the region, concern is growing in Poland that it will be among the countries hardest hit by the move. Overall, the UK is the second largest importer of Polish products, with Poland's 2015 exports to the UK valued at 50.5 billion zlotys (US$12.6 billion).

While electromechanical industrial goods account for a substantial proportion of Polish exports to the UK, there has also been significant trade in the food, automotive, aviation, marine and furniture sectors. As a consequence, Poland had a 2015 trade surplus of 30.8 billion zlotys with the UK, with imports standing at just 19.7 billion zlotys.

Aside from trade, there are currently some 850,000 Poles in the UK, with some 82% of them in employment. In more specific terms, 25% of the UK's Polish residents work in the industrial sector, while 20% are employed in the hospitality sector. A significant number of Poles are also engaged in the construction, health care, social assistance, education and administration sectors.

On top of that, some 150,000 UK-based Poles are officially classified as self-employed. In total, more than 40,000 UK businesses have been registered by Polish citizens.

With uncertainty surrounding the status of such businesses and individual employees once the UK withdraws from the EU-guaranteed right to live and work in any member state, concern is naturally high among many expat Poles. With negative attitudes with regard to immigration – particularly from Eastern Europe – identified as one of the key factors for the 52% of UK voters expressing their wish to quit the EU in the June 23 referendum, the status of such migrants is likely to remain unclear for some time.

The future status of EU citizens currently domiciled in the UK has already emerged as a likely bargaining chip in the coming Brexit negotiations, with the British side certain to want assurances over the status of its own citizens now living in EU member states. In the case of Polish immigrants, this is likely to prove a particularly contentious issue, with many UK voters alleging there is already too high a proportion of such individuals in their own communities.

Such uncertainties have already had negative consequences for the zloty. The value of the Polish currency fell by 3% against the Euro on the morning following the announcement of the referendum outcome.

Poland may also suffer from another consequence of the UK's departure. The UK is currently one of the largest contributors to the EU budget, while Poland has been one of the largest recipients of funding from the EU's regional development fund. With the UK no longer paying towards such initiatives, it is highly likely that such funding will be dramatically reduced.

With its trade interactions with the UK set to decline, Poland can take some comfort from its increasingly bright prospects further afield, particularly with China. Over the last decade, Poland has seen a 257% rise in its exports to the mainland, with this predicted to grow at an average rate of 11% over the next five years.

This will see the level of Poland's exports to China growing at a faster rate than its average level of total exports, which are estimated to grow by 5-6% per annum until 2021. Over the same period, however, Poland's imports from China are expected to grow by up to 9% per annum.

Overall, Poland has its largest trade deficit with China. At present, the value of its imports from China compared to its exports stands at a ratio of around 10 to one.

Anna Dowgiallo, Warsaw Consultant

Content provided by Picture: HKTDC Research
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