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| A demonstrator holds a placard during a protest against the outcome of the UK's June 23 referendum on the European Union (EU), in central London on June 25. / AFP-YONHAP |
Weakening Euro, consumer confidence to drag exports
By Kim Yoo-chul, Jhoo Dong-chan
The UK's recent decision to leave the European Union (EU) may lead to a period of uncertainty and will weigh on leading Korean exporters, officials and industry experts said.
The country's top two electronics companies ― Samsung and LG Electronics ― said Sunday that they are "closely monitoring" how "Brexit jitters" may affect their key businesses in Europe.
But representatives at Samsung and LG remained calm in comments over their detailed plans in the wake of Brexit.
"Heightened uncertainty during negotiations over new arrangements between the UK and EU will likely dent investment inflows and consumer and business confidence in the UK, weighing on its growth prospects," Moody's Investors Service said in a report.
A source at Samsung, who wished to remain unidentified, said the world's leading technology company has sided with the view at Moody's and added a growing possibility that if the Euro falls its value will weigh on Samsung's business in the European market.
"The biggest worry is that the Brexit may dent consumer and business confidence. There are possibilities that more European consumers may tighten their belts in spending for consumer products," said an executive at LG Electronics on the condition of anonymity.
But it's highly unlikely that the two electronics firms may suffer from any significant damage from Brexit as they don't operate manufacturing facilities in UK.
Samsung Electronics has an appliances plant in Poland, while it runs television plants in Hungary and Slovakia.
LG also runs a complex in Poland. "Based on the ITA agreement, mobile phones and electronic component are exported to UK without tariff. Brexit won't be an imminent threat," said an official at one LG Group's technology affiliate.
Hyundai Motor, the country's top automaker, said it was in the process of implementing measures to keep the firm competitive as Brexit may weaken consumer demand for premium vehicles.
"Brexit will discourage demand in the European auto market to a great degree. The European auto market was a 10 million car market last year due to its low interest rates, and automakers have enjoyed strong sales there. But now we need to prepare for a serious blow in sales volume in the long term in Europe," an official at Hyundai said.
The shipbuilding industry said danger is lurking out there as weakening business confidence may drag down appetites by big ship owners to commission shipbuilding projects from Korean shipbuilders.
"Obviously, it is not a good sign for the company in the midst of restructuring. Uncertainty in a global market along with a weakened purchasing power could be another obstacle in the global downturn," said an official at Samsung Heavy Industries (SHI), the Samsung Group's shipbuilding unit.
"Brexit is expected to discourage project investment in the foreign construction market due to prevailing uncertainty in the global economy. It will be another blow to the refinery project in Karbala, Iraq, where the nation's three builders, Hyundai Engineering, GS and SK E&C, are participating in the consortium. The construction project has been delayed because of a lack of financing," a local analyst said.
