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Brexit-hit Poland Looks East

With the wider implications of the United Kingdom's decision to quit the European Union 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 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 US$8.05 billion with the UK, with imports standing at just US$5.15 billion.

Polish Workforce

Apart from trade, there are currently some 850,000 Poles in the UK, with some 82 per cent of them working there. Specifically, 25 per cent of the UK's Polish residents work in the industrial sector, while 20 per cent 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 nationals.

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 high among many expat Poles. Negative immigration sentiment – particularly from Eastern Europe – identified as one of the key factors for the 52 per cent of UK voters expressing their wish to quit the EU in the June referendum, means the status of such migrants is likely to remain unclear for some time.

Residency Question

The future status of EU citizens living in the UK has already emerged as a likely bargaining chip during pending Brexit negotiations, with the British side certain to want assurances over the status of its own citizens 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 communities.

Such uncertainties have already had negative consequences for the zloty. The Polish currency fell by three per cent 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 the EU's regional development fund. With the UK no longer contributing towards such initiatives, it is highly likely that such funding will be drastically cut.

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 per cent rise in its exports to the Chinese mainland, and is predicted to grow at an average rate of 11 per cent 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 five to six per cent annually until 2021. Over the same period, however, Poland's imports from China are expected to grow by up to nine per cent per year. 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 about 10 to one.

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Content provided by Hong Kong Trade Development Council
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