With the UK due to end its transition period with the European Union (EU) at the end of this year, having formally exited the bloc earlier this year, many industries and businesses are sounding the alarm that a hard or ‘no deal’ Brexit could cause serious repercussions for the British economy.
However, one sector that could be set to reap the rewards of the UK’s exit is its burgeoning cannabidiol (CBD) and wider cannabis sector, with some figures in the sector saying Brexit could allow the country to push ahead with further regulatory reform than would have been possible under the EU’s jurisdiction.
“With Brexit, the British government will have the option to not comply with EU law in some areas, and one of the first announcements the Food Standards Agency made was to classify CBD as a novel food, something that the EU has yet to officially confirm and is still holding out on this classification”, said Alexej Pikovsky, chief executive of European medicinal cannabis distributor Alphagreen.
Speaking to Proactive, the CEO highlighted that the European Commission is attempting to have CBD classified as a narcotic, a move that some say will almost completely destroy Europe’s medicinal cannabis industry if it passes through the European Parliament. However, once Brexit is concluded the UK will be able to dodge this potential pitfall.
“You can see that the UK already has the freedom to make CBD a novel food and therefore is more advanced to regulatory approval of CBD than the EU. That’s a big chance for the UK to become a leader in CBD”, Pikovsky said.
UK cannabis market growing fast
Pikovsky also said that while the UK is a smaller cannabis market than Germany or Denmark and the Netherlands, the sector is “growing fast” and will eventually also become a large market for the industry.
While there are some concerns around that the UK’s Financial Conduct Authority (FCA) will disallow cannabis firms from listing on UK stock exchanges, the CEO said this only applies to company’s that derive some of their revenues from recreational cannabis products in other markets where it is legal, such as Canada, and the regulator is in fact “very supportive” on the listing of firms that are focused solely on medicinal cannabis.
However, the UK’s medicinal-only cannabis market is developing slowly, as the CEO said growth in medicinal cannabis use is based upon GPs “educating patients” on its uses and is “not as exponential” as the multi-billion pound recreational cannabis ‘black’ market that currently exists in Britain.
But with Brexit, and freed from the need to abide by the complex web of EU frameworks on cannabis, Pikovsky said down the line the UK will have the opportunity to “accelerate” reform of its laws around recreational use and expand the market more broadly.
“The UK could come out as a big leader in the recreational space”, the CEO said, adding that he expects the legalisation of recreational cannabis in the UK within the next five years.
Billion pound potential
According to a report in December by market intelligence firm Prohibition Partners, the UK’s medicinal cannabis market is expected to reach US$1.3bn in value by 2024, while the total legal cannabis market is predicted to be worth US$3bn compared to US$190,000 in 2019.
The report was even shorter on its time frame for legalisation that Pikovsky, with Prohibition forecasting that the UK will legalise recreation cannabis by mid-2021, which alongside a “significant increase” in the accessibility of medical cannabis in mid-2020 will serve as a key driver of growth.