Cayman Islands leaders are seeking silver linings amid global political and economic turmoil in the wake of Britain’s decision to leave the European Union.
The Brexit referendum result Friday immediately led to the resignation of British Prime Minister David Cameron and saw financial markets tumble, while the British pound plunged to a 30-year low against the U.S. dollar.
The result has already led to calls for a second Scottish independence referendum, while leaders across Europe are bracing for a period of prolonged political uncertainty.
In the Cayman Islands the decision could impact the ability of citizens to live, study, work and travel freely within the European Union. There is also expected to be some impact on the financial services industry, though business leaders said it was too early to tell whether the changing landscape was a threat or an opportunity for the territory.
Cayman Islands Premier Alden McLaughlin, in a speech to the Legislative Assembly Friday afternoon, said the decision had repercussions far beyond the shores of the United Kingdom.
He said the Cayman Islands had benefited from Britain’s relationship with the EU, including though freedom of movement for Overseas Territories’ citizens. He predicted the prospect of new governments in the U.K. and the U.S. would mean a period of “great uncertainty” for world politics, including for Cayman.
But he said the island could prosper amid the turmoil.
“In this sea of uncertainty, Cayman is an increasingly attractive place to live, work, invest and do business.
“The sound financial position of the Cayman Islands Government and the growing strength of our economy make us an excellent option for businesses and investors looking for a safe haven amid the current political and economic turmoil.”
Jude Scott, the chief executive officer of Cayman Finance, said in a statement Friday that the industry would do its part to ensure the success and stability of the global financial economy in a period of uncertainty.
He said, “Short term we will see some volatility in the financial markets, however we will continue to monitor the political and economic situation and plan for the long term to ensure we are well prepared for any implications this decision has over the next few years.”
Independent legislator Winston Connolly said the full impact of Britain’s exit from Europe remained to be seen. But he suggested there was opportunity for Cayman in the fallout to attract high-net worth individuals to the island.
“A number of people will be uncertain and looking for certainty and Cayman should seize this as an opportunity to offer them that. It’s an incredible opportunity to grow our economy,” he said.
The timing of Britain’s withdrawal from the European Union and the shape of any future relationship between the country and its continental neighbors remains to be established. Some forecasts suggest it could take more than two years for a new formula to be put in place, sparking fears of prolonged uncertainty in financial markets.
Mr. Cameron will officially relinquish the leadership in October with former London mayor and leading Brexit campaigner Boris Johnson the early favorite to replace him.
Mr. McLaughlin said he would be meeting with other overseas territories leaders and speaking to Overseas Territories Minister James Duddridge in the coming months to get a clearer picture on the likely impact of the decision.
“It is too early to make predictions or to be able to say what the full impact of the leave decision will be. But certainly it will be profound. It will impact not just the U.K. and its citizens resident there, but the overseas territories, crown dependencies and indeed the wider world.”
Tim Ridley, former chairman of the Cayman Islands Monetary Authority, said the decision of the U.K. to leave the EU was “perplexing and foolish.”
He added, “The ‘Dad’s Army’ brigade, who still dream of days of the Empire, and the generally disaffected have very possibly and irresponsibly thrown Britain’s youth and future over a cliff. They may come to rue their votes in the next few years. Likewise, the EU may come to regret the loss of the huge stability and influence the U.K. brought to the table. The only thing certain right now is uncertainty.”
He said the two key issues in any future negotiations between the U.K. and Europe were trade and financial services and freedom of movement, both potentially impacting Cayman.
“Any limitation on British passport holders’ ability to study and work and travel freely in the EU will similarly impact Caymanians who hold full British passports. This could be a significant downside. It certainly concerns me very much.
“Cayman has already met with difficulties in offering its financial products and services in the EU, e.g. passporting of Cayman funds. Those difficulties will be much greater with the U.K. out of the EU. On the other hand, both the U.K. and Cayman will have greater freedom to maintain and develop their tax and regulatory regimes without the heavy hand of Brussels bearing down on them. The U.K. will have far greater flexibility in its dealings with Cayman and particularly with respect to financial services and our regulatory regime. This could be a very significant advantage, but very much depends on the U.K. approach.”
Nicholas Dixey, a British lawyer with Nelson and Company in Grand Cayman, said the reality of Britain’s exit would take a while to sink in.
“Nobody really believed this was going to happen. Many Brits who voted “remain” are presently feeling sad, anxious and bewildered about the result. While many who voted “leave” are delighted, many are also apprehensive about the future.
“As the dust settles, Britain now has a real opportunity to reach out to European partners and make the case for a new, leaner, more flexible Europe of vibrant sovereign nations working together in friendly solidarity.
“We do not need an overbearing unelected European Commission to impose laws and regulations for mutual success, nor do we need to sing ‘Ode to Joy’ together. Only by empowering citizens and rebuilding and strengthening the relationship between the voters and their representatives can the darker rising forces of fascism be defeated.”