PETALING JAYA, June 23 — United Kingdom and Malaysian trade relations will suffer if the former leaves the European Union, economists said yesterday.

Former Finance Ministry deputy secretary-general Tan Sri Ramon Navaratnam said the British economy would shrink leading to a weakening of its economy and that of the EU.

He said a weaker economic position for both would increase uncertainty and reduce confidence in investors there taking a stake in businesses abroad.

“This will affect not only UK-Malaysia but also relations between Asean and Europe in business, trade, investment and tourism.

“When people are uncertain, they won’t make business decision easily. They will wait for the uncertainty to blow over until the situation has stabilised,” he said.

Navaratnam, also Asian Strategy and Leadership Institute (ASLI) director, said it would be better for the UK to remain in the EU as it would ensure stability, certainty and confidence.

Describing the move to leave the EU or Brexit as an “isolationist” move, he said there would be a regression of trade between Europe and Asia.

“The environment for trade and investment between the two regions will be adversely affected,” he said.

Alliance Bank chief economist Manokaran Mottain said the financial market could be affected because of the unexpected change in UK status.

“You can expect some changes in the exchange rate. The ringgit will appreciate against the pound sterling. There could also be reduced trade and investment between UK and Malaysia,” he said.

Meanwhile, Malaysia International Chamber of Commerce and Industry (MICCI) president Datuk Jalilah Baba said Malaysian businessmen would need to establish a new base in a European country if Britons decided to leave the EU.

She said this was because many had been using the UK as a gateway to Europe.

“They have been seeing UK and other EU countries as a single market. If UK wants to be on its own, then Malaysian businessmen will have to approach the EU market separately which would pose logistical and financial difficulties for them,” she said.

Jalilah, who is also Crewstone International Sdn Bhd chairman, said there was also the possibility of Malaysian businesses not succeeding in making a ‘connection’ with other European nations as they were used to UK business model.

She said Brexit would isolate the UK as most of the world moved towards trading through economic blocs.

“This will lead to the UK not being able to benefit from the EU which holds more potential as a collective entity,” she said.