Could the UK’s medicinal cannabis market reignite the economy post-Covid?
Rick Brar, CEO and Founder of Brains Bioceutical shared his thoughts on the potential importance of the medical cannabis industry as the UK moves towards a post-Covid economy.
The UK is undoubtedly going to face economic hardship in the coming year. Whether it be the ramifications of Covid-19 or the uncertainty regarding post-Brexit trade relations, the UK will be searching for an injection of economic activity.
Could attracting investment into the UK’s medicinal cannabis market be an effective and appropriate way to turbo-charge an economy still reeling from the effects of a global health pandemic?
Until recently, the UK was the largest exporter of medicinal cannabis in the world. In 2017, it was responsible for 69% of global exports of medical cannabis and, according to a report by the Prohibition Partners, the UK’s legal cannabis market is expected to reach over £2.3bn by 2024.
Yet, the current domestic distribution of medicinal cannabis remains low. Owing to the restrictions and difficulties faced in producing and supplying medical cannabis in the UK, almost all the medical cannabis prescribed in the UK is imported. Although at present, other nations produce and export more medicinal cannabis than the UK, the UK has an enormous amount of latent potential.
A strong, regulated legal cannabis industry releases economic benefits from new jobs, tax revenues and R&D innovations to societal benefits that give patients and consumers access to high quality products, informed choices and enhanced experiences that offer safety, legitimacy, and affordability.
In the face of this unprecedented global crisis driven by COVID–19, wellness and general health have come to the forefront. Cannabis has remained remarkably resilient through the pandemic, with better-than-expected sales growth in most markets. Heightened levels of anxiety and health concerns, in addition to the financial assault brought about by the COVID-19 pandemic, have arguably enhanced the need and benefits of cannabis integration.
Late September 2020, the Financial Conduct Authority went someway to releasing this previously untapped financial potential, by releasing guidance stating that it would contemplate allowing Medicinal Cannabis companies to float on the London Stock Exchange. The FCA’s ruling offers hope for investment within two broad categories, those being “medicinal” cannabis and “cannabis oils”, however, the third category “recreational cannabis” remains outside the scope of guidance.
The FCA’s guidance provides real scope for UK-based cannabis companies to secure significant investment, and if followed through, list on the London Stock Exchange. The development has the potential to provide UK companies with a significant level of private and public investment at a time when the UK is so desperately in need of it. The guidance will provide companies who have the means and needs to satisfy domestic demand for medicinal cannabis the impetus to enter the market.
Whilst the FCA’s guidance signals a shift in the right direction, many barriers to entry still exist in the UK medicinal cannabis, including unclear regulation for businesses and investors. Many potential investors feel unable to participate in the UK Cannabis market owing to regulation around the Proceeds of Crime Act (POCA.) In the UK, the POCA covers not just “criminal conduct” which takes place within the United Kingdom but also criminal conduct which would be classified as such within the United Kingdom, even if legal in the territory it took place. Given the variation of cannabis legalization around the world and some large cannabis companies having both recreational and medical operations, there will need to be some division if they are to list in the UK market.
The guidance will go a long way to ensuring that investment can be made by companies operating in the medicinal cannabis space in both the domestic and overseas market. Indeed, we have already seen reports of a $100m private equity fund being developed in the UK’s medicinal cannabis space.
Hard as it is to believe, there was no European cannabis market to speak of five years ago. Fast forward to 2020, and we have a burgeoning industry stretching from medical to a broad spectrum of CBD products. The Cannabis industry has become increasingly diverse with businesses covering each stage from seed to shelf. Pharmaceuticals are now leaping into the sector to explore the possibilities. These endemic players are likely to be joined by conventional food, beverage, tobacco and other consumer product companies that for years have been anticipating a multi-billion-dollar global cannabis market.
With pharmaceuticals conducting clinical trials to evaluate the efficacy of different cannabinoids for therapeutic uses, the research will become more conclusive and medical cannabis will be validated as an alternative treatment for healthcare systems around the world. This would also have the added benefit of reducing crime, as it is estimated that around 1.4 million adults are self-medicating in the United Kingdom with illegal cannabis owing to the difficulties faced in being prescribed medical cannabis.
Britain has a strong international reputation within the life sciences and pharmaceutical industries. It is critical that a strong national research and drug discovery industry continues post Brexit. As more technologies, formulations, and products are developed to satisfy the needs of the patient and customer, the medical cannabis industry will start to grow exponentially.
At a time when a pandemic-driven economic recession has eradicated jobs and devastated national budgets, the cannabis industry creates a world of economic opportunity – opening new avenues for tax revenue, significant job growth and alleviating pressures on the public health system. Fully embracing the legal cannabis market could give the nation the economic boost it needs to thrive and compete.
Whilst the United Kingdom has not experienced the phenomenal legal cannabis related jobs boom seen in North America yet, lessons can be learnt and the market potential recognised. Whilst the US is cited as having conflicting cannabis regulation owing to both federal and state law discrepancies, there has been some progress. In December 2020, the US House of Representatives passed a bill to decriminalise cannabis at the national level for the first time. Together with other regulatory updates for cannabis and cannabidiol (CBD) in the European Union and the UN reclassification of cannabis means production, sales and commercialisation opportunities are expanding.
Ensuring the industry is regulated without choking access to patients and placing huge costs will be key to opening the market, undermining illicit trade and bringing existing users out of the black market
With the right regulatory environment, sustainable financial growth and strong consumer acceptance, the stage is set for 2021 to be a highly anticipated year for multiple stakeholders in the cannabis industry.