Economic Impact of Brexit on Non-eu Member State

Running head: ECONOMIC IMPACT OF BREXIT ON NON-EU MEMBER STATE
Economic Impact of Brexit on Non-EU Member State
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ECONOMIC IMPACT OF BREXIT ON NON-EU MEMBER STATE1
Introduction
Brexit represents the removal of the United Kingdom (UK) from the single market and
customs union of the European Union (EU). The majority of the country voted in favour of
leaving single market and customs union of the EU, although, the deal between the UK and EU
have still not finalized. Therefore, there will be a huge impact on the relationship of the country
with the EU member countries. Moreover, the implication of the Brexit will also spread outside
the EU among non-EU member states (Government.no 2020). One of the important non-EU
member states are Norway and Iceland. Hence, the trade relationship of the Norway and Iceland
with the UK will be affected due to the disruption and uncertainty caused by the Brexit. The
Brexit may also likely hamper the real per capita income and growth rate of the UK. Moreover,
the negotiation of the new trade pact between the UK and other countries is required because of
the changes brought by the Brexit. Hence, the trade agreement signed between the UK and
Norway and Iceland on 2nd April 2019, which would come into effect after the Brexit
(Ons.gov.uk 2020). As of 2018, the total trade between the UK and Norway and Iceland
remained worth 30.6 billion pound.
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The adverse effects of the Brexit may downgrade the growth of the trade and business.
The disruption and uncertainty caused by the Brexit may result in force shut down of several
companies in UK and non-EU member states (Fossum and Graver 2018). There will be impact
on the economic growth of the UK, Norway and Iceland. There is a high possibility that Brexit
will influence the inflows and outflows of the foreign direct investment (FDI) and trade relation
between the UK and non-EU member states Norway and Iceland. The weaker pound will lead to
the surge in share prices of various companies of the UK. Thus, the business of those companies

ECONOMIC IMPACT OF BREXIT ON NON-EU MEMBER STATE2
with the rest of the world would be affected because of the weaker pound (Theurer, Ruiz and
Latorre 2018). Furthermore, the companies of the UK that may affect due to the Brexit include
British American Tobacco and GSK.
The countries that are most exposed to trade in relation with UK will hit hard by the
Brexit. Furthermore, the volume of trade of the UK with other countries would be lowered post-
Brexit, especially, the countries such as Belgium, Ireland, Cyrus and Netherland. Thus, most
exposed countries in terms of trade perspective will be affected dramatically. Therefore, the
strong trade relation with the non-EU member countries also may bring merits and demerits for
the nations participating in trade (Buckle, Hewish and Hulsman 2015). The dependence of the
EU and non-EU member countries on the UK because of exports and imports may hamper the
overall growth of the countries. The analysis of the data below will help to understand the
economic growth of the UK, Norway and Iceland.
Figure 1: Annual GDP growth rate of the United Kingdom from 2010 to 2020
Source: (Tradingeconomics.com 2020)

ECONOMIC IMPACT OF BREXIT ON NON-EU MEMBER STATE3
Annual GDP growth rate of the UK from 2010 to 2020 is represented in Figure 1.
Graphically, the annual economic growth of the UK in the 3rd quarter of 2019 was 1.2%, which
contracted to 1.1% in 4th quarter of 2019. After the first three months of 2018, it was the weakest
expansion registered by the country. The reasons behind the slowest growth rate were reduction
in growth of household consumption and sluggish fixed investment. However, there was
improvements in net external demand and government spending. In addition, the annual growth
rate of the UK rebounded by 1.4% in 2019 from 1.3% in 2018 (Gov.uk. 2020). Therefore, the
economic growth rate of the country fluctuated and witnessed lower growth due to the Brexit.
Figure 2: Annual GDP growth rate of Norway from 2010 to 2020
Source: (Tradingeconomics.com 2020)
Figure 2 shows annual GDP growth rate of Norway from 2010 to 2020. The growth rate
of the Norway in 4th quarter of 2019 scaled up by 1.8% in comparison with the same period of
2018 (Tradingeconomics.com 2020). Over the period of ten years, there was no such
improvements in the annual economic growth of the Norway.