Brexit: Impact on the UK Economy

This essay examines the economic consequences of Brexit, the UK's departure from the European Union. It explores the historical context of the EU, the challenges faced by the UK as a member, and the potential impacts of Brexit on the UK economy, including trade, immigration, and the value of the pound sterling. The essay concludes by discussing the uncertainties surrounding Brexit and its long-term implications for the UK.

BREXIT
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Table of Contents
INTRODUCTION................................................................................................................................3
BRIEF HISTORY OF EU..................................................................................................................3
CHALLENGES FACING THE UK AS A AFFILIATE OF THE EUROPEAN AMALGAMATION................5
BREXIT IMPACT ON THE UK ECONOMY 500................................................................................9
CONCLUSION.................................................................................................................................14
REFERENCES...................................................................................................................................15
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INTRODUCTION
Brexit refers to the “British Exit”, the UK’s departure over an European Union (BBC, 2019). In
June’16 on 23rd, The Brexit survey was whispered in the UK. The economic effects of Brexit
became the major area of debate after the Leave vote of UK.
The composition emphasizes on the possessions of Brexit over the UK economy by considering
the areas of EU membership and the challenges born out of the membership. The essay will
cover each aspect of Brexit that may directly or indirectly throw an impact on UK economy.
BRIEF HISTORY OF EU
EU refers to the “European Union” involving 28 European countries. It is a political & economic
union that allows free movement and free trade of people to work and live in whichever
country they choose (BBC, 2019).
 ORIGIN OF THE EU
The EU was recognized when the Maastricht Treaty came into power in the year 1993. The
European Union traces its origin to the ECSC (European Coal & Steel Community) and EEC
(European Economic Community) which was respectively came into force in 1951 as a Treaty of
Paris & 1957 Treaty of Rome.
 DEVELOPMENT AND GROWTH OF THE EU
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The European Union’s action has the main purpose of inspiring commercial progression in the
companion nations while emphasize over auxiliary Help for profession, isolated segment
expansion, provincial monetary incorporation and Civic investment & Macroeconomic
Valuation. Also, an evidence study of EU states that there is a connection among the economic
expansion & commercial progress (Asteriou and Spanos, 2019). The result of the study
investigated that commercial change has a huge influence on the financial progress and
economic activities of the developed and developing countries.
 CURRENT MEMBERSHIP OF THE EU
As of 2019, the European Union consists of 28 member states. All the associate states are
exposed to the commitments and rights of the participation. The member states of EU are
exposed to the binding laws within the common legislation.
In the year 2016, the UK held survey on EU participation in June which resulted to be in the
favor of leaving which accounted at 51.89% votes cast. Thus, the government of UK formally
initiates the process of withdrawal on 29 March, 2017 and invoked Article 50 which is known as
“Brexit”. This implies that UK was scheduled to stop being the member of EU. The result of the
2016 survey on UK’s participation in EU has the potential to significantly change both EU-UK
security landscapes (van Ark, 2019).
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CHALLENGES FACING THE UK AS A AFFILIATE OF THE EUROPEAN
AMALGAMATION
There are numerous challenges that have to face by the UK during the membership of EU.
Being a member of European Union, UK went across different challenges and issues including
the high membership fee, political status, laws, threat of Union, travelling etc.
For the time, when UK is being a full member of the EU, all the obligations and rights fully
applied to the UK. The political system and the EU immigration on the Britain’s welfare system
stand as the bigger challenges for UK. UK has faced large number of consequences when being
a member of EU and some of them are following
 COST OF EU MEMBERSHIP FEES
Figure 1: UK Payments to EU budget
Source: (Full Fact, 2019)
The very first area of focus for UK as a member of European Union is the cost of membership. It
has been found that UK contributed additional to the EU than it gets back. As of 2018, the
government of UK spends near £12-14 billion to the EU economic structure where EU outgoings
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on UK were just £3.5 billion. Thus, the contribution of UK government was accounted at £9
billion (Full Fact, 2019). The UK government gets some money back in the form of payments for
farmers or poorer areas but still UK overall pays 8.9 billion which is more than it gets back ( Full
Fact, 2019).
Figure 2: UK -EU Membership fee in 2018
Source: (Full Fact, 2019)
A membership fee is not same as the benefit of the EU membership or as the total economic
cost. The Treasury figure shows that EU directly pays to the private sector which worth at£ 2.3
billion by 2016. It still reduces net contribution (Full Fact, 2019).
 IMMIGRATION
The international organization of migration released that there were total 146,287 arrivals to
Europe by the third quarter of 2017, out of which 137,777 were by sea. The data released is
less than half the total data recorded by end of September 2016.
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As of 2017, there were around 4.4 million citizens immigrate to the member states of EU where
3.1 million emigrants left the member state of EU. Since past years, the sum of migrants
existing in the UK commencing the further EU nations raised up to three times from 0.8 million
to 3.4 million (Wadsworth et al., 2016).
 INCREASE IN THE NUMBER OF REFUGEES COMING TO BRITAIN TO CLAIM ASYLUM
UK advised to show more concern for Syrian refugees because they travel to the UK from other
EU countries (BBC, 2015). According to the EU rules, refugees that travel to UK are intended to
privilege safe haven in the European state they arrive first. Migrant voice found increasing
number of other nationals including Syrians who travel at UK to join relatives but have to face
deportation as they started their new life in another EU member state (BBC, 2015).
 BRITAIN’S ABILITY TO MAKE ITS OWN LAWS
While being a participant of European Union, the political laws changes and splits among the
countries, this is the reason, the relationship between Britain and Europe do not succeed and
thus withdrawal of UK from European Union becomes necessary.
 BRITAIN’S STATUS IN THE WORLD
The current analysis of Britain’s economy resulted to be the 5th largest economy in the world.
Also, Britain provides a big market for the EU exports (Petroff, 2017). David Davis, a lead
negotiator of Britain mentioned recently that his country’s economy was the leading economy
and positioned at fifth in the world (Petroff, 2017).
POLITICAL RELATIONSHIP
Stefan Haagedoorn investigated about why European incorporation has become a challenging
issue for UK. The question answered in the manner by identifying the political and economic
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situation in Europe (Haagedoorn, 2017). This political account ties in with UK’s unwillingness to
“join Europe”. Also, UK had nationalized its steel and coal production & thus locates little
incentive in joining Europe community (Haagedoorn, 2017).
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 TRAVELLING IN THE EU
The citizens of UK needs to have the passport to travel in the EU and the passport must be valid
for at least 6 months and also requires to take the permission for the international driving if
intend to use a car (BBC,2019).
 THREAT TO THE UNION
UK has a threat of living in the membership of EU, the higher vote casts for leaving the UK
shows that the decision of Brexit would be effective for UK. The data statistically shows that
England and Wales both nominated for Brexit by 52.9% and 51.9%. But North Ireland and
Scotland nominated to remain in the EU by 54.9% and 61.75%. The vote cast might affect the
decision of UK of Brexit.
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BREXIT IMPACT ON THE UK ECONOMY 500
 ARTICLE 50 (withdrawal negotiation)
United Kingdom raised article 50 on 29 March, 2017 of the Agreement on European Union
(TEU). It is the decision of United Kingdom to get a departure from the European Union. The
member state’s withdrawal is commonly known as “Brexit”. To begin the withdrawal
negotiations, UK gave a formal notice to the European Council and thus the leaving process was
initiated in June 2017 by a referendum which favored by 4% margin (52% to 48%).
During the two years process of withdrawal negotiation, an agreement were made to discuss
some aspects of negotiation such as EU and UK both must agree on the decisions of divisions of
assets, laws, rights etc. Also, must consider the issues of EU budget and the future rights of EU
nationals. Thus, the appeal approved by the EU members, UK parliament and EU Parliament
and concludes through the UK diminishing on 29 March, 2019. The time limit is prolonged and
currently is 31 October 2019.
 Having to negotiate new trade relationship
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Figure 3: UK's top 10 trading partners
Source: (BBC, 2016)
The UK has vast capacity of trade but after the withdrawal negotiation process initiates, UK-EU
has to negotiate new trading arrangements. If EU waits for the formal withdrawal of UK, the
negotiation of trade might drag for next five years (BBC, 2016). Awaiting a pact, UK will
negotiate new trade relationship with EU beneath WTO (World Trade Organization) rulebooks.
EU negotiated trade treaties among 53 countries including Singapore, Canada and South Korea
(BBC, 2016).
 New EU importation charges and possibility of fronting non-import tariffs
After the withdrawal negotiation, UK exports will supposed to remuneration new EU
importation charges and will face non-tariff barriers just like US and China trade with EU. Due
to this, UK will also lose their favored access to the EU single market (BBC, 2016). Non-tariff
barriers resulted to be more obstructive for UK than genuine charges. This may include financial
barriers, technical measures, health regulations, price controlling measures such as taxes and
import prices etc. There are number of new UK-EU associations implicated in the new non-tariff
barricades to trade with the EU (Institute for government, 2017).
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 Decline in the value of Pound Sterling
Figure 4: Pound presentation EU referendum
Source: (Mustoe,2019)
Brexit is already affecting the businesses of UK. IMF says that due to the Brexit delay,
businesses have to face more uncertainty. The extended period of uncertainty may create great
depression in the business leaders of UK (The Guardian, 2018). As of 2016, the imported goods
from the EU countries and the holidays became more expensive where the UK exports became
cheaper. During past years, pound has rough time of things as compared to dollars & other
currencies.
 Reduction in Gross Domestic Product
After the appeal of UK to withdraw EU approved by the EU parliament, the services of UK that
account for 80% for UK budget would mislay the superior contact to the solitary market of EU
which is known as the largest profession area having more than 500 million consumers
(BBC,2016). The step taken by the UK would effect in a great damage for UK as it is no longer
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qualify to access the EU market. As of 2017, the UK provided merely 49% of the food that is
disbursed in the UK (GOV.UK, 2018).
 Reduction in the size of trade market
EU primarily negotiated with 53 countries including Canada, South Korea and Singapore but
after the decision of Brexit, the permitted trade treaties will be no lengthier applied to the UK.
In order to receive these benefits of trade deals, UK has to re-negotiate with EU countries (BBC,
2016). If in any case, UK left the EU duties merger and contracted a free trade agreement, the
properties that are adventure the boundary have to meet the source supplies to demonstrate
they truly come from the UK (Institute for government, 2017).
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 inflation due to rising cost of food & other items imported from the EU
Figure 5: Origin of food consumed in the UK
Source: (GOV.UK, 2018)
As of 2017, UK import its 30% of the food and other items from EU and 10% food from the
breather of the world, the major factor that may raise the cost of food is the direct result of
Brexit. It may include the taxes or tariffs on the smuggled goods, changes in the value of pound,
extra checks that may slow down the goods crossing borders (Schraer, 2019). At a moment,
when UK is a member of EU, it would not been charge any tariffs but after Brexit, it would have
been charged 40% taxes on goods coming from EU countries (Schraer, 2019).
 Ability of British citizens to live and work in other European countries
The government of UK initiates the right to work in any nation. According to the UK
government, if a person is a citizen of UK, he doesn’t require a permit to work in the European
Commercial Zone (EEA) (GOV.UK, 2018 a). The EEA includes all the countries that are in the
European Union. A British citizen has all the rights on the basis of working conditions, social
security and pay. There will be no change in the status and rights of living and working of British
citizens in EU (GOV.UK, 2018 a).
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CONCLUSION
In a nutshell, it can be said that UK has faced many consequences after taking departure from
European Union. The essay outlined each factor related to the Brexit and shown its negative as
well as positive impact on the operations of UK. It covers the areas of trade market, import
tariffs, political relationship, domestic production and each aspect on which Brexit may throw a
huge impact.
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REFERENCES
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