Brexit Consequences on Trade, Investment, and Globalization

This article discusses the impact of Brexit on trade, investment, and globalization. It analyzes the theory of investment presented by Keynes and the effects of protectionism and globalization. The article also explores the consequences of the exit on the British economy, including reduced investment, high unemployment rates, inequality, and curtailed globalization benefits.

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Contemporary Issues in Economics
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Comment on how the trade between the EU and the UK domestic
producers and entrepreneurs will be affected following the
upcoming Brexit, assuming that free access to the EU markets is
prohibited. Use the theory of investment presented by Keynes, as
well as the effects of globalization and protectionism.
Introduction
Largely, Brexit implies the majority decision that supported the exit of
the United Kingdom from the European Union (Hunt & Wheeler 2018).The
Brexit vote is expected to take effect on March 29th in the year 2019.The
Brexit vote consequences on the British economy are being felt .Following
the announcement of the decision to leave the European Union, the sterling
pound depreciated. In addition, the level of investment has declined since
the announcement year. In a way, the exit undermines the globalization
goals which advocate for the free market access for all countries and lesser
trading costs for producers and entrepreneurs thus boosting their income
and consumption levels. However, possible outcomes are the higher trading
costs due to the subjection of trade protectionist measures such as tariffs,
customs, border control and other requirements for British entrepreneurs to
trade with the single market member states. Overall, the investment,
unemployment, income and globalization benefits for the British economy
will or have reduced.
Theory of Investment
Particularly, the depreciation of the sterling following the Brexit
announcement goes to show how the decision is affecting the British

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economy (Mussadique 2017). Following the Brexit, the investment future into
the British economy faces spells of uncertainty (Mussadique
2017).Undisputedly, investment plays an important role in growing the
economic activity of any economy thus its importance to any economy
Predominantly, investment according to Maynard Keynes implies what
producers and entrepreneurs spend to increase their operation
capacity .Majorly, Keynes view of investment lies on the capital
productivity(marginal efficiency of capital).Owing to the uncertain trade
terms between the UK producers and the single market, there is likelihood of
reduced investment and income on both parties hence reduced economic
activity and revenue for the British entrepreneurs (Eklund 2013).Investment
has been very instrumental in creating employment opportunities which
have grown the British economy. The fall in investment has created an
income inequality between the producers of the United Kingdom and other
countries. In addition, the low investment rates has contributed to the rising
unemployment rate in the country.

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(Musadiqque 2017)
Unfortunately, the investment levels in the British economy have
slowed down following the Brexit vote .Following the vote, the investment
figures stagnated in the year 2017 based on the business investment report
done by the office of national statistics .According to forecast, the
investment rates are expected to be lesser by twenty percent as per the
European Union forecast referendums on the same (Jackson 2018).However,
due to the decline and uncertainty of the investment future of the United
Kingdom, there is likely to be reduced income for British producers and
entrepreneurs due to decreased investment and consumption. Typically,
investment thrives on consumption and the expectation of profitability.
Under the current situations, the trading future of British producers and its
former trading partners is in limbo thus discouraging long –term investment
between the former trading partners of the UK whilst in the European Union.

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Following the Brexit vote, the Bank of England interest rates been lowered to
prevent the economy from falling into a recessive cycles. overall, the British
economy growth rate is slow thus the need to address the concerns.
(Musaddique 2017).
Globalization and Protectionism.
Subsequently, the United Kingdom will undergo economic changes due
following the decision to leave the European Union which is the largest single
market in the European region. Positively, in the event that the United
Kingdom retains its free trade arrangement with the Union, then the
economic growth of the country will not suffer. However, in the event that it
is unable to enjoy free trade with Union members then there will be
economic changes in the economic activity of Britain due to globalization and
protectionist measures which exist outside free trade arrangements (Martin
2017).Primarily, protectionism implies the existence of trade barriers,

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customs, tariffs and other restrictive trade practices among foreign
countries. Usually, protectionism curtails globalization which is essentially,
global trade (Matsa 2018).However, protectionist measures might be
effective in growing the domestic economy of a country that uses them.
Typically, protectionist measures are aimed at protecting local
industries .Majorly, protectionist measures such as tariffs are criticized for
curtailing global trade hence slowing down the globalization benefits. Global
trade encourages free movement of goods and services among economies in
the world. However, through protectionist policies, the free movement of
goods and services is curtailed thus undermining globalized trade.

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Following the effectiveness of Brexit, the British economy is
likely to incur additional trade costs as compared to its trade participation
under the Union. This is because under the union there were no tariffs,
customs and other trade costs. In the event that the free trade agreement is
not renewed, British producers will incur additional costs to overcome the
trade restrictions in the form of compliance with regulations through
licensing, controls at the borders, tariffs and customs (Dhingra 2016).The
increased cost of doing business might lead to the employment layoffs due
to high operational costs. Also, higher tariffs will discourage investment thus
less income for British producers and entrepreneurs. Usually, employment is
boosted by increased investment which is dependent on the confidence
expectation of profitability which currently eludes the British
economy(Schwartz 2009).The British producers and Entrepreneurs are likely
to face shortage in trade balance due to inhibited flow of capital (Krugman
2016).The inhibitions on the flow of capital is due to the protectionist trade
barriers such as tariffs and customs With the inhibited capital flow following
the possibility of higher tariffs after the exist will affect the income of British
producers and entrepreneurs due to the higher tariffs as compared to
European Union member state producers and entrepreneurs.
Moreover, due to the Brexit vote there is uncertainty as to the future of
the British economy hence the negative impact on the returns expectations.
Due to the evolution of a globalized economy, there are various economic
impacts on the economy of a country from globalization thereby raising the

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issue of global inequality (Milanovic 2013).Owing to globalization, the
distribution of income and revenue among economies has changed.
Basically, inequality in a globalization perspective implies the income of
persons due to international activity. Following the Brexit vote, the Income of
British producers and business community. According to possible outcomes
for the British economy, might enjoy customs unions benefits. In addition,
British entrepreneurs might be able to enjoy EAA alongside the Single
market (Greator London Authority 2018).Basing on the capitalistic
coordination approach, the British entrepreneurs will be subject to the
market forces as opposed to the strategic interaction previously available
under the European Union. Under the Union, the UK producers were
governed by the free market rules of the Union. However, after the exit, UK
entrepreneurs are likely to encounter income changes due to the changing
nature of their former economic relations with the European Union member
states.
Primarily, British producers are players in the coordinated markets
before the effectiveness of the Brexit vote in the European Union market
(Hall & Gingerich 2009) .However, following the exit, the producers will be
viewed as operating in a liberal market economies. For some analysists, the
Brexit vote is curtailing the whole point of globalization(Elliot 2016).Typically,
globalization thrives on free trade arrangements .However, following the
vote, British producers and entrepreneurs will be subjected to protectionist
measures such as tariffs and customs from the single market thus setting

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back globalization efforts. The British producers and entrepreneurs will be
subjected to income inequalities as compared to EU member states
producers due to the additional costs of trading thus reduced revenue for
them(Milanovic 2013).Also, globalization will be curtailed owing to possible
restricted movement of production factors between the British producers and
the European Union member states. The income inequality will be due to the
fact that other countries, especially European member’s states producers
and entrepreneurs are not subjected to protectionist measures such as
tariffs, custom barriers and other trade restrictions like the latter group of
producers and entrepreneurs.
Conclusion
Undoubtedly, the Brexit vote has negatively impacted on the
British economy as evidenced by the low investment rate, high
unemployment rate, inequality income for the country and local
entrepreneurs owing to the Brexit vote. The uncertainty facing the British
economy after the exit has created lack of investor confidence and the
likelihood of higher trading cost have created a decline in the economic
activity and revenue for the British economy industry players. According to
Keynes perspective of investment, the British economy marginal efficiency of
capital following the vote, is not promising thus the possibility of negative
consequences on the British economy before things get better. Certainly, the
British economy might recover quickly in the event that the single market
access is free of tariffs and customs. However, in the event of protectionism,

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the British economy will be subjected to reduced investment rates, high
unemployment rates, inequality and curtailed globalization benefits.
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