The fallout from the Brexit vote is far reaching

Posted on: Jun 27, 2016 - 09:17 AM | General

A ship loading B.C.-made wood pellets for export to be used in biomass-power generation.

 

The fallout from the Brexit vote is far reaching

The United Kingdom power is British Columbia’s biggest buyer of wood-pellet biofuels and Thursday’s Brexit vote to leave the European Union just made the province a more expensive place for them to do business.

The value of the pound plummeted by seven per cent against the Canadian dollar in currency trading Friday on international markets, which makes it tougher to negotiate new sales into the U.K., said Gordon Murray, executive director of the Wood Pellet Association of Canada.

“In theory, there shouldn’t be any impact on existing business,” Murray said, “except the fact is when they’re buying with a devalued currency, it makes it more expensive for them.”

In the broad scheme of Canada’s economy, the U.K. is our country’s biggest European export market. Within that though, the U.K. only represented about 1.1 per cent of B.C.’s external trade in 2015, said Ken Peacock, chief economist for the Business Council of B.C.

In 2015, B.C.’s exports to the U.K. totalled $398 million (compared with $19 billion to the U.S.). The province’s imports from the U.K. totalled $395 million (compared with $20 billion from the U.S.).

“In the broad context of the provincial economy, the impact (of the Brexit vote) is more negligible,” Peacock said.

However, for some sectors the post-Brexit economic impact is a bigger deal. In tourism, for instance, the U.K. is a key overseas market for B.C.

And B.C.’s wood-pellet producers have tapped a market among the U.K. coal-fired power plants that have been converting their boilers to burn wood fuels to help meet the country’s greenhouse-gas-reduction targets under EU regulations.

Murray said the B.C. industry, with 12 factories in the province, generated about 1.7 million tonnes of wood pellets, referred to as biomass, in 2015 with 70 per cent of it going to the U.K.

In 2015, biomass wood pellets were B.C.’s biggest export to the U.K. at just over one million tonnes worth $159 million, according to trade data collected by Statistics Canada.

“So, (the Brexit vote) is a big deal for us,” Murray said.

However, it is the longer-term uncertainty about what the U.K. will do with respect to its commitments on climate change that worry Robert McCurdy, CEO of Pinnacle Renewable Energy, B.C.’s biggest biomass producer.

“That’s the piece that I think throws some uncertainty into the equation,” McCurdy said.

Lumber, at a value of $50 million, was B.C.’s second biggest export to the U.K. in 2015, and in an emailed statement, an industry representative said producers don’t expect a direct hit from the Brexit decision.

“We have a good trading relationship with the U.K. and Europe,” Council of Forest Industries CEO Susan Yurkovich said in the statement. “However, it is the U.S. and Asia that are the primary markets for B.C.’s forest products,” with the EU as a whole only accounting for three per cent.

Off-highway dump trucks — 92 vehicles worth $49 million — and whiskies worth $23 million were among B.C.’s biggest imports from the U.K. in 2015.

 

Source: Vancouver Sun