Dubai shopping malls could be hit in the tills if Britain votes to leave the European Union next week.
The warning from economists comes as global markets are roiled by jitters over the outcome of the British EU membership referendum that is just one week away.
The ripples from the referendum are expected to be felt far beyond Britain and the wider European bloc as economies and industries digest the implications of Brexit.
While many pollsters say the referendum is too close to call, the Leave camp has gained momentum in recent days. An Ipsos Mori poll of 1,257 adults for the UK’s Evening Standard newspaper released yesterday revealed 53 per cent support for Leave and 47 per cent for Remain.
With polling day approaching, markets have been plunged into volatility.
“If Britain does vote to leave the EU, most people believe sterling would fall sharply, and clearly that would affect consumer decisions,” said Jason Tuvey, a London-based economist with Capital Economics..
“Dubai is one place that could be hit as a result, although Dubai is a hub for tourists from a lot of places. So although it would be a headwind, it would not completely knock it off the rails by any means.”
The city’s retail and hospitality sectors have already been hit hard by the strong US dollar, to which the UAE dirham is pegged. That has reduced the purchasing power of visitors from Europe, and it has had a knock-on effect in the malls where they shop and the hotels where they stay.
Western Europe accounted for almost one in four visitors to the emirate in the first quarter. The UK was the third biggest source country in the first three months, accounting for 334,000 visitors.
The Emirates airline chief Tim Clark said earlier this month that a British exit from the EU could send the European currency into “freefall”.
Tim Fox, the chief economist of Emirates NBD, shared that concern.
“Depending on how far the pound and euro fall in the event of Brexit it could certainly add another headwind to tourism flows to the region,” he said. “These have been impacted variously by the Russian rouble and Chinese yuan weakness in the recent past, so it would be natural to think that any sustained weakness for the pound and euro would have an additional impact.”
The Middle East Council of Shopping Centres declined to comment on the likely impact of a Brexit vote on the retail sector.
The looming referendum in the UK has also focused attention on Dubai property, which has suffered from the strong dollar and the weak oil price.
While further sterling or euro weakness is unlikely to be cheered by the sector as it seeks to emerge from the doldrums, economists say the fallout from a referendum vote to leave may be less pronounced than in retail or hospitality.
“As for property it is a bit difficult to tell,” said Mr Fox. “I don’t get the sense that the property sector is dependent on European purchasers and investors – more the case that local and regional buyers are behind demand. Expats certainly are participating, but these usually have local salaries behind them, which should not be affected really.”
The referendum to decide whether Britain will remain in the European Union or leave will be held on Thursday.
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