UK polls close on EU Brexit referendum

Al Greenwood

23-Jun-2016

Prime Minister David Cameron speaks at a 22 June 2016 Remain rally in Bristol, UK. (Simon Chapman/LNP/REX/Shutterstock)
Vote results will be released on Friday morning, but financial markets on Thursday suggested that an exit seemed unlikely. Prime Minister David Cameron speaks at a “Remain” rally 22 June rally in Bristol, UK. (Simon Chapman/LNP/REX/Shutterstock)

HOUSTON (ICIS)–Voting for a UK referendum on the EU ended on Thursday, with many fearing that currency fluctuations would follow a decision to leave the union, altering trade flows between the island nation and the US.

But judging from financial markets, an exit seemed unlikely, as the major indices in the US rose by well over 1%. Results from the vote are expected early Friday morning.

If the UK did vote to leave the EU, then a so-called Brexit would likely weaken the British pound against the US dollar.

The UK is a major trade partner with the US, according to statistics compiled by the American Chemistry Council (ACC).

In 2015, US chemical exports to the UK totalled $7.46bn, making it the seventh largest destination behind Brazil. Chemical imports from the UK totalled $13.3bn, the fifth largest provider for the US, behind China.

While the ACC did not break down the UK imports by chemical group, many are pharmaceuticals, said Kevin Swift, chief economist of the trade group.

Some of the products may have originally come from Ireland – the largest source of US imports – and later exported through Northern Ireland, which is part of the UK, he said.

In the run-up to Thursday’s vote, the British pound tended to weaken when polls showed voters favouring an exit from the EU. As such, leaving would likely cause the US dollar to strengthen against the pound, making US exports less competitive and UK imports more attractive.

This could threaten the profitability of the INEOS cracker in Grangemouth, UK, since the plant would rely on US ethane. The cracker’s capacity is 700,000 tonnes/year, according to ICIS plants and projects.

Currency fluctuations are not the only fall-out from Brexit, Swift said. Financial markets also could become more volatile.

Leave champion Nigel Farage votes Thursday, 23 June, at Cudham Primary School, Biggin Hill, Kent, UK. (Grant Falvey/LNP/REX/Shutterstock)
Leave champion Nigel Farage votes Thursday at Biggin Hill, Kent, UK. (Grant Falvey/LNP/REX/Shutterstock)

Petrochemical market participants in Europe brought up concerns that also could be shared by those in the US.

A polycarbonate (PC) player said that several Belgian companies were worried about the UK imposing tariffs on their products if it left the EU.

The uncertainty about the vote had delayed third-quarter contract negotiations for polymethyl methacrylate (PMMA), according to a  distributor based in the UK.

In the US, policymakers may have to negotiate new trade agreements with the UK for products that were previously covered by deals made with the EU.

Financial and currency markets are in favour of the UK remaining in the EU, since they have risen and fallen based on polls showing voters favouring or opposing the EU.

The UK government said the country “will be stronger, safer and better off by remaining as a member of a reformed EU”.

Even before Thursday’s vote, uncertainty about the UK’s membership in the EU caused companies to delay investments and purchases of petrochemicals, market participants said.

British polls closed at 22:00 hours London time (21:00 hours GMT). The final results are due at about 07:00 Friday.

Additional reporting by Katherine Sweeney and Yana Palagacheva

INSET IMAGE: Postal ballot paper for voting in the EU referendum. (Geoff Pugh/REX/Shutterstock)

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