Rapaport Group says the exit of Britain from the European Union (EU) or Brexit will not have sustainable negative impact on polished diamond demand. Chairman of the group, Martin Rapaport said in statement to Mining & Travel Review that the EU has not been a dominant diamond consumption centre for many years.

“While a negative wealth effect due to declining currencies and equity markets will reduce EU and British commercial demand, global investment demand for higher quality diamonds as a store of value will increase due to global economic and political uncertainty,”  Rapaport said.

The UK recently went for a referendum where 51.9% of the population voted to leave the EU while 48.1% said no to the exit. The poll results led to shockwaves around the world with many global stock markets plummeting. The British Pound, which has over the years been a strong currency, was also hard hit.

However, Rapaport said Brexit will intensify the pressure banks are putting on the diamond trade. He said liquidity will continue to be reduced. “While Brexit is not expected to significantly reduce overall polished demand it will indirectly impact trade liquidity resulting in price volatility,” the group said.

“It is vital that rough diamond producers maintain price levels that ensure profitability and liquidity in the manufacturing sector during these uncertain times. Furthermore, producers must increase their marketing spend to ensure generic diamond engagement ring demand from U.S. millennial consumers.”

Chinese and Indian diamond demand is not likely to decline due to Brexit and is sustainable at current low levels. 

“The important U.S. market will remain healthy and retain growth. We do not expect any significant medium to long term negative impact on the U.S. diamond market. While demand may benefit as a stronger dollar increases purchasing power, a short term decline in equity prices and wealth may reduce demand during the quiet summer months. Overall we expect a positive U.S. Holiday season this December.”