Economics, Finance and Banking

Running head: ECONOMICS, FINANCE AND BANKING
Economics, finance and banking
Name of the Student
Name of the University
Author Note

ECONOMICS, FINANCE AND BANKING
Table of Contents
Answer to question a).................................................................................................................2
Answer to question b)................................................................................................................4
Answer to question c).................................................................................................................6
References list:...........................................................................................................................8

ECONOMICS, FINANCE AND BANKING
Answer to question a)
European Union is the political and economic union that was formed combining 28
countries. The main purpose of this union was to promote peace and trade among the
countries after the World War 2. United Kingdom was one among the 28 countries that
formed the European Union. Every year the European Union charges billions of pounds as
membership charges, UK was unable to recover these charges (Ringe 2018). In addition, as
UK was the part of the European Union the immigrants in the country increased drastically
and UK did not have the right to control the limit for itself. UK facing these losses decided to
sign a referendum to exit the European Union and reinvent itself to be a supercharged
economy one day (Brown 2018). Two campaigns were formed in order to carry forward the
referendum; Exit Campaign and Stay Campaign. On the 23rd June 2016, UK citizens came
together to vote for this and the exit campaign go the majority vote. This made the markets
collapsed.
There were many long term and short-term impacts on the UK economy from leaving
the European Union. Long- term impacts were as follows:
A significant drop in FDI services and jobs: According to McGrath (2016), due to
changes in FDI, the growth rate of Ireland would result in significant decrease post the
BREXIT. UK and Ireland were quite aligned in terms of the trading policy. UK leaving the
European Union would have a negative effect on the number of jobs created by the FDI
projects. FDI flow in UK had a positive impact on creating jobs prior the BREXIT. The
European Union detected an increase of 461% in FDI projects in the year 2014-15, because
UK was the part of EU membership (Dhingra et al. 2016). Leaving the European Union
membership would result in loss of jobs and unemployment in the FDI projects.

ECONOMICS, FINANCE AND BANKING
Impact on the GDP of UK: The economic polices published by the government
would result in a drop of the GDP by 6.7% and a drop of 6.4% in the wages due to Boris
Johnson’s BREXIT proposals. GDP also known as Gross Domestic Product, is the value of
the all the economic activities taking place in a country, it is the money made by the goods
and services sold or produced in a country. This helps the economist to say how an economy
is doing. The government forecasted that a free-trade agreement (FTA) with the EU would
lead in a growth of GDP in the next 15 years by 4.5% to 6.7% (Armour 2017). This
hypothesis was on the basis that the number of EU migrants moving to UK would get
balanced with the number evacuating abroad. Hence, this would have little or no impact on
the GDP of the country. If UK exits the European Union, it is estimated to show a drop in the
GDP.
Fall in pound: There was a significant fall in the value of Pound in the year 2016 at
the time of BREXIT referendum. This was assumed a short-term impact due to the political
economic issues. Almost 4 years has passed and there is little recover in the value of the
pound. Weaker pound leads to inflation as it increases the price consumer products. The bank
of England forecasted a fall in inflation from 2.1% in July 2019 to 1.5% by the end of the
year. Mark Carney, governor of the bank revises this prediction by saying that it can go up to
5.5% in by the year 2020 (Korus and Celebi 2018). The bank still searches how to tackle the
inflation, whether to increase the interest rate or not.
Short-term impact on UK economy due to BREXIT are discussed below:
Decrease in trade with EU countries and rise in tariff barriers: Being a part of a
union with 28 countries was a good opportunity to trade with these countries, which would
have made trade easier and help in economic growth. Post the BREXIT, trading with these
countries would become difficult for the United Kingdom and hence would make trade