Brexit and Its Implications on UK International Businesses

Running Head: ECONOMIC ASSIGNMENT
Economic Assignment
Name of the Student
Name of the University
Author note

1ECONOMIC ASSIGNMENT
The regions of UK those are voted to leave European Union are more vulnerable to
economic shocks after Brexit. The adverse consequences of trade are likely to impact UK
economy in terms of a much slower GDP growth. With Brexit referendum has weakened the
bargaining position of Britain in the global market. The exit of Britain from European Union has
major implication for economic, political, legal and cultural environment across the globe. The
economic uncertainty of Brexit means an unfavourable business environment (theguardian.com
2018). This raises challenges for both domestic and international businesses in UK. Businesses
in UK suffer from a lack of information about suitability of their product or services. Challenges
have been also faced regarding the time management to conduct overseas business. Regulation
and legislation overseas affect the operation of UK businesses globally. Brexit creates a likely
disruption in forms of change in exchange rate, imposition of tariff, need for a more complicated
paperwork and a much longer time for delivery to the final consumers.
The operation of UK international businesses experiences some major changes in the
external environment. Beyond Europe, there is a potential threat from existing trade agreement
of EU with non-EU countries where UK businesses enjoyed access prior to Brexit.
Economic factors play an important role in decision of business. The economic factor
influencing businesses are concerned with goods, service or money. The economic factors by
influencing the state of the economy affects the business environment. The macroeconomic
environment of international business depends on the economic factor such as interest rate,
exchange rate, recession, inflation, taxes and supply and demand. Within Europe UK records
second highest GDP lagging only behind Germany (theguardian.com 2018). The economic
environment of UK offers a favorable business atmosphere for domestic and international

2ECONOMIC ASSIGNMENT
businesses. Business however affected significantly from global economic recession of 2007/08
and recent event of Brexit.
After Brexit, UK has experienced a depreciation in the value of pound. The domestic
currency has depreciated more than 13% after Brexit (independent.co.uk 2018). A decline in
relative value if currency makes UK goods cheaper in the international market and thus foreign
purchaser of UK products have benefitted from a lower price. This is however a bad news for
UK business operating globally. The companies now face a higher price for needed input abroad.
This affects the profitability of the businesses. One factor contributing to a decline in the value of
pound is the anticipation that UK is facing an inferior trading relationship globally because of the
withdrawal from EU (Nugent 2017). The complexity in international supply chain disrupts the
production of many goods adversely affecting business expansion.
UK membership in EU provides nation access to the EU single market. The single market
access describes a situation where EU is treated as a single market without having any internal
boundary or hurdles in forms of regulation ensuring a barrier free flow of goods and services
among the member countries. The full membership of UK in EU lead to a substantial cost
reduction in exchange of goods or services by eliminating any external cost of trade. The single
market access to EU substantially eliminates tariff or cross border taxes, custom checks,
eliminates non-tariff barriers particularly having implication for service trade (Tsoukalis 2017).
The single market access reduces tariff and non- tariff barriers within EU member states in a
more convenient way than the existing trade deals, custom union or free trade areas able to do.
Access of UK firms to the single market extended beyond the benefits of free trade
agreements. The EU has committed to eliminate all forms of tariff and non-tariff barriers by
enforcement of wide competition law and coordination of product regulation. The ability of UK