Brexit & General Elections: UK Cannabis Scene on Hold

With elections on the horizon and a murky Brexit conclusion, regulatory progress in the UK cannabis sector looks to be on hold.

 

Political turmoil makes headlines but not much else

The Brexit limbo has had several unfavourable effects on financial markets across the board. Even in 2016, large firms began exploring alternative major capitals to open up shop. Cities like Paris, Berlin, Dublin and Madrid have since all been hoping to attract businesses seeking protection from Brexit.

In a journal article from 2017 by the American Economic Association, an Associate Professor of Economics at the London School of Economics (LSE), Dr. Thomas Sampson, concluded that ‘Brexit will make the United Kingdom poorer than it would otherwise have been because it will lead to new barriers to trade and migration between the UK and the European Union.’ Sampson added, however, that the degree to which the UK would be negative was still bound in uncertainty.

Related: How Far is the UK from Legalising Marijuana?

Since this article, The Guardian has been reporting monthly updates on the economic effects of Brexit since 2016. Though the results of the referendum haven’t technically been implemented, the uncertainty of the UK’s future can already be measured.

(Source: The Gaurdian)

November’s findings, published on the 28th of November, indicate few positives beyond a relatively stable Sterling pound. A less-than-stellar jobs sector, dwindling business activity and uncompetitive share prices compared with the United States and Europe all evidence some of Dr. Thomas Sampson’s biggest concerns.

(Source: The Guardian)

The burgeoning cannabis industry, one that still relies so heavily on regulatory approval, is thus in a holding pattern in the UK.

Members of the House of Commons are scrambling to rally their respective sides for the upcoming national election on the 12th of December. Shortly after its conclusion, Brexit negotiations will resume with Brussels and in the British parliament up until the 31st of January deadline. Even assuming a conclusion next year, whipping up a convivial framework for cannabis still appears to be low on the list of priorities.

Some experts, like Patrick Morton, co-founder of Cannabis Invest UK and CEO of the investment firm Supreme Heights, see things much differently, however.

At the inaugural Cannabis Conference in London held by Bryan, Garnier & Co. on the 28th of November, Morton told Strain Insider how adding favourable cannabis positions to one’s agenda could serve politicians on both the left and right of the aisle.

He said,

‘As it pertains to cannabis, the societal issue is drugs, gangs and crime. A lot of the violence that springs up as a result of these “tit for tat” crimes occurs in order to control the, literally, tiny drug trade in many neighborhoods. It’s front page news, too.’

In London, in particular, these stories tend to revolve around the epidemic that is missing children’s cases. Often a child is recruited to a local gang, indoctrinated to no small extent and then sent off to other parts of England to facilitate drug trafficking elsewhere. ‘And this is an epidemic at the moment’, said Morton. ‘In my opinion, and as an industry proponent, there is such a win-win scenario here if cannabis is legalised.’

Related: Money Talks – How Much is Cannabis Legalisation Worth?

Cutting off major revenue streams to gangs has multiple effects. First off, they become far less influential within their neighbourhoods. As less money is floating around due to legalisation, gang leaders have a more difficult time enticing adolescents to join them. Enforcement also becomes much cheaper in a world where cannabis is legalised.

In a survey from the Office of National Statistics that ended in March of 2014, cannabis possession offences made up 67 percent of all police-recorded drug offences in the UK.

Trends of other police-recorded crimes against society, 03/2002 to 2013/14, according to The Office of National Statistics in the UK.

(Source: The Office of National Statistics)

In 2018, The British Medical Journal (BMJ) added that ‘the war on drugs costs each UK taxpayer an estimated [~€470] a year’, reporting that ‘vast sums are spent on prosecuting individuals and trying vainly to interrupt the flow of drugs into cities, carried along “county lines” by vulnerable children.’

Putting these funds to larger, more pertinent areas of crime appears logical on paper; even more convincing is the revenue gained from taxing legalised cannabis all along the value chain. Canada, the first valid data trove, earned roughly €127 million in tax revenue in the first five and half months after cannabis legalisation, according to Reuters.

Unfortunately, such profits are only a slice of the larger narrative. Morton, whose cannabis conferences typically attract the financially-minded, describes an amalgam of moving parts that go slightly beyond tax earnings and crime reduction.

 

Controlling the cannabis conversation

Even if the cannabis conversation made its way to the front page of a national conversation, it might still not be enough. ‘Media coverage is critical’, says Morton. ‘But without the validation of the medical community, the movement loses a lot of steam.’

On the 1st of November, 2018, following a handful of highly-mediatised cases of children with epilepsy, the UK legalised the use of medical cannabis.

In the biggest story, a 12-year old boy named Billy Caldwell faced life-threatening seizures after authorities confiscated his cannabis-based medication. While still illegal in the United Kingdom at the time of the confiscation, cannabis products have shown impressive results when treating maladies such as cancer, epilepsy, sleep disorders and a laundry list of other medical conditions.

Despite this victory last year, few medical professionals have begun prescribing cannabis to patients. Part of the problem has to do with stipulations in the law that state cannabis-based medicines can only be prescribed when other licensed medicines don’t satisfy a patient’s needs.

Related: How European Health Insurances Handle Cannabis Prescriptions

Secondly, general practitioners in the United Kingdom are not able to hand out a cannabis prescription; it must come from a specialist or consultant, such as an optometrist or, in the case of Caldwell, a neurologist.

Finally, many specialists who are able to prescribe cannabis typically aren’t doing so because of a steep knowledge gap. This is as much cultural as anything else. With only a year of legalisation under its belt, taboos still range large despite convincing evidence of the medicinal benefits of cannabis.

Although media coverage was helpful to move things along, concrete progress has halted behind the scenes. And. if the taboo continues to linger within the medical community, investors and entrepreneurs looking to build out profitable cannabis businesses are going to become even more hesitant.

However, Nikolaas Faes, a senior analyst at Bryan, Garnier & Co., is looking to change this.

In an interview with Strain Insider, Faes explained that very few financial professionals are looking into cannabis simply due to the lack of high-quality research. Admittedly, he only stumbled into the subject himself when he was analysing market risk within the beverages industry.

Faes said,

‘Historically, I am a beverages analyst. A few years ago, I was making an update on Molson Coors, and I thought, “I better take a look at this cannabis thing to see if there’s going to be any impact or not.” The first document I looked into was from the United Nations Office on Drug and Crime. In the foreword, I read that there were no recorded overdose deaths from cannabis. I was immediately gobsmacked.’

The impact of what he eventually discovered while conducting his research would indeed be enormous on the alcoholic beverages industry. Reports are already pouring in that users, both recreational and medicinal, are consuming less alcohol when also ingesting cannabis.

Faes said, ‘25 percent of the consumers who are consuming cannabis, alcohol and tobacco said that they decrease their consumption of tobacco and alcohol by 50 percent [when they are using cannabis]. For medical patients also using cannabis products, they report a decrease of 40 percent of their traditional prescriptions.’

Thus, the alcohol and the pharmaceutical business sectors should take a deep interest in the progress of cannabis.

From CBD products to help with inflammation in endurance athletes to other cannabis strains that assist with anxiety, the market is attracting a surprising amount of first-time users. The healthful angle, regardless of the jurisdiction, has been another effective route for cannabis to enter mainstream consciousness.

 

 

However, Big tobacco and alcohol firms’ interest in cannabis has, thus far, been mixed. While the likes of Molson Coors and heavyweight Constellation Brands are moving into the space via calculated acquisitions, lobbying groups working on their behalf are slowing things down on the other end.

Related: The Biggest Cannabis Investments in Europe in 2019

This information, in addition to the recent announcement from the Food and Drug Administration (FDA) in the United States that CBD may have harmful effects when ingested, highlights this dynamic clearly.

‘It’s not a stretch to assume that its the lobbying from tobacco and alcohol that is keeping the FDA from offering a more positive stance’, said Faes.

Concluding, the state of cannabis is as multi-faceted and complex in the UK as in any other part of the world. Positive results arise following a serendipitous combination of reasonable media attention and backing from the medical community. From there, businesses and investments look to enter the space in various forms and build out critical infrastructure throughout the value chain.

After that, politicians, even those faced with a Brexit-scale crisis, will begin to take notice and orchestrate legislation to support one of the fastest-growing, grassroots movements in the world.

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