The country’s ready-made garment sector—its biggest industry—will be hit hardest.
“The short-term visible impact of the Brexit is devaluation of currency that has already witnessed about 10 percent fall. Bangladesh will bear the brunt of the exit as it is the third largest single export destination for our products,” Bangladesh Garment Manufacturers and Exporters Association (BGMEA) president Faruque Hassan told the Dhaka Tribune.
As a result, he added, “The buyers will try to cut prices and to some extent event to cancel the orders.”
According to Hassan, though Britain’s secession from the EU was only announced Friday, tumult in the country has already weighed on demands for clothing products.
One exporter told the Tribune that Brexit will mean he gets a lower price for his goods, which will ultimately weigh on the country’s export earnings.
For the period from July 2015 to May 2016, Bangladesh exports to the U.K. totaled $3.44 billion, and $3.18 billion of that came from the garment sector.
Britain’s pound sterling has fallen against the dollar (1 pound fetching $1.35 at publication time), and if the downward trend persists, Bangladesh exports to the U.K. will take a hit.
Currently, Bangladesh enjoys duty free, quota free trade with the EU—which accounts for roughly 12 percent of Bangladesh’s total trade—under its Generalized Scheme of Preferences (GSP).
The big question in Bangladesh now is whether its trade privileges will remain intact.
“I hope the duty free facilities will remain same even after the Brexit,” Hassan told the Tribune. “Otherwise, the sector people as well as the government have to handle the issues diplomatically and politically.”
The Brexit separation process is expected to take a couple years, and Bangladesh may now look to negotiate with the U.K. directly to maintain the GSP benefits beyond the next two years.