Brexit: Impact on UK and EU Economy

This article discusses the impact of Brexit on the economy of the United Kingdom and European Union, including trade practices, tariffs, and non-tariff barriers. It explores the challenges faced by the UK as a member of the EU and the consequences of Brexit on trade relations.

BREXIT
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CONTENTS
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Brief history of European Union.................................................................................................3
Challenges facing the UK as a member of the European Union.................................................4
Impact of Brexit on UK and member nation’s economy.............................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
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INTRODUCTION
The Brexit is a term used for the action taken by United Kingdom to leave the European
union due to several issues and difficulties in term of trade or being a member nation, it is facing
within this association. There are several reasons due to which United Kingdom leave its
membership with eth European union and bring up huge influence over its trade practices as well
as economy at a larger extend (Dhingra and et. al., 2016). In order to develop understanding
about its influence over trade and economy of United Kingdom and European countries this
review is performed in this report. It put emphases toward studying about the brief history of
European Union, challenges faced by UK as a member of European Union and at last it put
insight over impact of Brexit.
MAIN BODY
Brief history of European Union
The European Union is a international organisation which consist of a group of 27
countries of Europe which given the common social, economic and security policies. The United
Kingdom which was the founder member of EU get separated from this association in year 2020.
This European Union was formed un der the Maastricht Treaty that came into force by
November 1, 1993 with an aim to improve the economic as well as political integrity by using
single currency i.e. euro, security policy and unified foreign policy and maintaining over a single
citizenship right and extending the cooperation among the areas of asylum, immigrants and
judicial; affairs (Steinberg, 2019). This association of European country also Won the Nobel
prize in year 2012 by maintaining peace and democracy throughout the countries under
European union.
The European Union i.e. the association of European countries was basically a series if
efforts that are made by the government of nation in order to integrate it since World War
Second. After war get ends, several wester European countries sought closure economic,
political and social ties in order to gain the military security, economic growth and for promoting
the reconciliation among the France and Germany. At the end of 1951 six countries i.e. Belgium,
Italy, France, Netherland, Luxembourg and West Germany signed a treaty and year 1952 they
found a European Coal and Steel Community (European Union, 2020). The member country also
send proposal to United Kingdom to join this but it refused. Later on these countries of ECSC
signed two more Treaties of Rome that results into establishment of European Atomic Energy
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Community (Euratom) and European Economic community (EEC). The EEC support in creating
a common market where the barrier to trade get eliminated in order to ensure smooth flow of
services, goods, labour, capital and prohibit several public policies or agreements that inhibit the
competition of market. Through the year 1970 and 80 the EEC gradually expended its scope as
well as membership as in year 1973 the United Kingdom, Ireland and Denmark were admitted to
the group and later in 1981 Greece, in 1986 Spain and Portugal (Sampson, 2017).
After that a Single European Act was came in force by year 1987, 1 July with the
significant expansion of EEC for providing more intensive coordination of foreign policies
among members. This contribute a lot in sustainably increasing the funding to regional and
social development programs. Later on The Maastricht Treaty was signed in year 1992, which
result into European Union. In July 1993 the Prime Minister of British John Major was forced to
call a vote of confidence for securing its passage. This treaty based on three main pillars such as
the European Communities, a improved cooperation in justice and domestic affairs and Comin
foreign and security policies. This treaty was formed in order to promote free trade among the
member countries by reducing the trade barrier and supporting with several ways. Additionally,
for commercial and social benefit several banks were also get established in order to provide
assistance to members country in term of tehri economic growth (Lawless and Morgenroth,
2019). In year 2015 the Euroskeptic parties get capitalized through on-going migrant crisis in
Europe as a huge number of refuses enter. It also result into a deadly terrorist attack in Brussel
and Paris, these creates a pressure over British prime minister and he undertook a renegotiation
regarding the relationship between the UK and EU which get concluded in year 2016 that result
into continue relationship with EU. But in June 2016 around 52 percent of British voter elected
to leave EU and this event took up the name of Brexit.
Challenges facing the UK as a member of the European Union
The British votes trop leave the European Union in order to manage the affairs of their
country by own to ensure its appropriate growth and success. There are several issues that United
Kingdom faced while staying a member of European union, such as this association facing a
dysfunctional economic issue and failed to address those economic issues that are being confront
to the member country since year 2008 and Europe as a whole get stagnated economically. This
in turn make the countries more affected with financial issues and the liberty of UK regarding
full freedom of moment right since 2004 affected this situation adversely. As a result of which
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the people from poor countries started migrating to UK for seeking job and improving their
living standards (Brexit:The Reason and Impact, 2020). After this event it is noticeable in parts
of country like London and other major cities of nations found to have a foreign community who
came from the poorer country and now staying in country taking benefit which in turn affecting
the main residents of country. The UK had absorbed around 333000 new people as recorder in
year 2015. This immigration become the highly politicised issue for Britain which is moving in
US and many other place from past few years. So it has been argued by the UK independent
party that the flood of immigrants from the Eastern as well as Southern Europe has affected the
wages of the native born British workers. This in turn also affecting the economy of UK as
immigrants working thei8r and sending back their earning to their home country which can be
used for improving the living standard of the citizen of country (Brexit, 2016).
Other than it was also believed that European Union was bringing negative influence
over the British Economy because it was getting an unbalanced economic organisation as the
economic issues that EU is facing is also affecting the GDP Of United Kingdom. It is so because
the people that are operation small businesses within UK likely to pay off the taxes to EU as a
part of its policies (Fahy and et. al., 2017). Buti due to economic crises these charges are getting
higher as a result fo which it become quite difficult for those local small business operators to
maintain their business operations smoothly and generate more revenue as they have to pay off
high charges over their earning. This is ruining the economic growth of the country by affecting
its GDP rate.
Despite of this it is also being stated that the EU was imposing the left-wing big
government policies over Britain. Due to this structure of EU’s antidemocratic structure which
gives too much power to eth corporate elites and preventing the British left from the getting form
a significant giant.
Impact of Brexit on UK and member nation’s economy
The impact of Brexit is very much adverse not for the United Kingdom only but also for
the rest of countries comes under European union. This is so because the countries maintain the
free trade relationship with one another which allow them free movement of good and services
without any kind of barriers. The UK was third most important imported of the good from
Germany which constitute a major part of the economy of Germany. But after the Brexit, the
companies that are trading freely within European market started seeing that their goods are
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being exposed to a new cost each time when they came across with a channel. These costs are
being imposed in the form of tariff and non-tariff barrier. This affected the economy of UK very
badly as it exports in four major sector such as automotive, healthcare, consumer goods and
technology. From this it has been found that if the export to EU continued to be at same level as
it is in 2016 from UK then this add up the total cost of £3.8 billion per year which affect the
economy of UK to a huge extend (Brexit. 2016).
It has been found that along with UK other EU countries also get affected as these are the
Britain’s largest trading partners as recorded in year 2018 that the UK export around 54% of
good from EU countries and around 46% is exported to them. Other than this the Germany’s
export dependent economy was suffering from the a Brexit shock that along with the rise in the
global trade and structural change in car industry. This in turn has threaten to shift the Europe’s
economic power into a recession to its economy. This is so because the Germany is a main
exported of Britain but after Brexit this export is dropped up to 21 percent quarter on quarter.
This leads to biggest fall since the financial crises which result into contraction in GDP of
Germany (Kierzenkowski and et. al., 2016). This is so because the gross domestic product in
Germany are account of approx. 47% that constitute a major part of its economy as comper with
only 30 percent of Britain and French economy and around 12 percent in US. Germany sell
around €82bn of goods to UK as marked ion year, as it is UK ‘s largest sources of goods that get
imported by the country and UK is Germany’s fifth largest export market after France, UK,
Netherland and China (Brexit weighs on Germany’s export-dependent manufacturers, 2019). But
now the Germany export to UK has already being down by 12 percent that affected its economy
as it is a huge down turn in its income. Other than this the United Kingdom also not remain
untouched with this economic issue as after Brexit there is a huge fall in the economic condition
of the country. Its is so because the several organisational that are operating in UK has shifted
their headquarter back to the country to which they are affiliated. In addition to this the pound
sterling has fallen to around 14 per cent on a trade weighted basis as found in year 2016 report
(Brexit. 2016). Other than this the price related with trading to EU countries has also get
increased as the tariff and non-tariff barriers are being imposed by the member nation of EU and
UK is a major partners in term of trade with EU countries that affected its import and export
practices which taken up the whole economy of country as its earning and revenue is get affected
to a larger extend. The official figures shows that around 44% of the total export of UK went to
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EU countries till year 2017 which is a big ration and hence it constitute a major part of countries
economy (No-deal Brexit: what would ‘WTO terms’ mean for UK-EU trade? 2019). But after
Brexit the trade relation among UK and EU get affected and several kind of trade barriers or
restricting get imposed along with high taxes that results into a down turn in economy of United
Kingdom.
CONCLUSION
From the above performed review about the Brexit terms it has been found that there is a
huge influence over the international trade with Europe because of it. As a separation of United
Kingdom affected the trade practices of several countries to with which it usually maintains a
strong trade relationship. The export trade practices of UK and EU countries has highly get
affected as after Brexit its free trade relations get end with eth member countries of EU and as a
result for which the tariff and non-tariff barriers get imposed on the trade practices. This in turn
affected and limited the trade that not only affected the economy of United Kingdom but also
influence the European countries too.
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REFERENCES
Books & Journals
Dhingra, S. and et. al., 2016. The consequences of Brexit for UK trade and living standards.
Steinberg, J.B., 2019. Brexit and the macroeconomic impact of trade policy uncertainty. Journal
of International Economics, 117, pp.175-195.
Sampson, T., 2017. Brexit: the economics of international disintegration. Journal of Economic
perspectives, 31(4), pp.163-84.
Lawless, M. and Morgenroth, E.L., 2019. The product and sector level impact of a hard Brexit
across the EU. Contemporary social science, 14(2), pp.189-207.
Fahy, N. and et. al., 2017. How will Brexit affect health and health services in the UK?
Evaluating three possible scenarios. The Lancet, 390(10107), pp.2110-2118.
Kierzenkowski, R. and et. al., 2016. The economic consequences of Brexit.
Online
European Union. 2020. [Online] Available through:
<https://www.britannica.com/topic/European-Union>.
Brexit: The Reason and Impact. 2020. [Online] Available through:
<https://www.arcgis.com/apps/Cascade/index.html?
appid=859d42bc60d640888aa4bf9f20f85d6b>.
Brexit. 2016. [Online] Available through: < https://blog.usejournal.com/how-does-brexit-affect-
the-import-of-goods-into-the-uk-from-china-410a2130a0cc>
Brexit weighs on Germany’s export-dependent manufacturers. 2019. [Online] Available through:
< https://www.ft.com/content/20c144ec-c7ee-11e9-a1f4-3669401ba76f>
No-deal Brexit: what would ‘WTO terms’ mean for UK-EU trade? 2019. [Online] Available
through: <https://www.euronews.com/2018/12/19/how-would-uk-eu-trade-be-affected-
by-a-no-deal-brexit>
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