Impacts of UK Leaving the European Union

This essay analyzes the impacts of UK leaving the European Union on trade and economic performance. It examines the effects on trade, foreign direct investments, supply chain, living standards, and transfer pricing. The overall conclusion is that Brexit is likely to have negative consequences for the UK's economy.

ESSAY 1
The European Union (EU) is known to be one of the world’s most powerful alliances of
different countries. The event known as the Brexit is one of the most revolutionary and
significant events in terms of the global trade and economic changes. The event has already
led to a number of implications and would continue to do so, around the globe. As a result,
there has been an ongoing debate as to what will the likely impacts of the said event. The
following work is aimed at analysing the impacts of UK leaving the European Union. The
impacts would be analysed on the lines of the trade and economic performance of the UK,
whether the same would be enhanced or reduced with such exit. The essay will begin with the
meaning of the term Brexit, its background and would analyse the possible impacts that have
been occurring in economic scenario of the UK. The essay will conclude on the whether the
overall effects are negative or positive.
The term Brexit is used to define the (Britain plus exit), that is the referendum in June 2016,
in which the UK voted to exit the European Union. The critics of the event and the major
number of economists are of the view that being the part of the European Union, the trade
and the economy of the UK was under a range of positive impacts; the same would be
withdrawn by the said referendum. It is significant to note that the European Union is the
largest trade partner of the UK in terms of the trade. This is backed by the fact that
approximately half of the overall trade of the UK are with the EU. Being the part of the EU,
there was a significant reduction in the costs of trade between UK and EU. The reduced costs
were reflected in the reduced and cheaper prices for the goods and services for the consumer
of the UK. In addition, the same aided the businesspersons to indulge into more export trades.
The leaving of UK from the EU will lead to the reduction in the trade and specifically exports
from the UK to the EU. The reason for the same would be higher tariff rates and the presence
of the non-trade barriers to the trade.
It is essential to note that the overall trade would be impacted on two major lines. Firstly the
new tariffs and secondly the non-tariff barriers to trade are the said two factors. It must be
noted that if the trades go on the same lines as that of the EU and the existing WTO rules
with the different countries, this would lead to the average tariff being charged on the exports
from the to the EU and vice versa, would be somewhere between 2% and 3%. This would
lead to the lower trade and a direct reduction in the GDP of around 1 percent. In addition to
the above the non-tariff barriers such as manufacturing requirements, plant, and animal health
regulations and others, that are necessary to be met before the imports. The said barriers and
other incidental barriers may now increase.

ESSAY 2
The next major impact would be on the foreign direct investments of the nation. This can be
explained as follows. Foreign Direct Investments or the FDI is referred to as the investments
that occur from outside the country and are used to acquire either the local entities or the
starting up new subsidiaries of the existing companies, or the expansion of the existing
establishments within a country. It is significant to note that the UK was one of the major
recipients of the foreign direct investments from the varied range of the members of the EU
(Sampson, 2017). As the country UK is a part of the Single Market, the country was an
attractive platform for the exports. It is further to note that the country comprises of a strong
set of the legal rules and statutes, together with the highly educated workforces and the
flexible labour rates. This has made the country an attractive sport for the foreign direct
investments. In numerical terms, the country was in receipt of FDI in terms of stock value of
£ 1 trillion. The UK FDI flow has been pointed out to be approximate around 25 to 30
percent from the EU membership, which marks a significant impact evolution of UK FDI
(Campos and Coricelli, 2015). Approximate value of the FDI from the member EU countries
was half of the total, as per the data of the UK Trade and Investment (UKTI, 2015).
The said foreign investment would result in a number of monetary aids, economies of scale
and technology and the benefits on line of the business operations for the UK. The Brexit
would result in the significant reduction in the FDI in the UK as per the trends as stated
above. This is also because a number of international agreements as on the lines of the World
Trade Organisation (WTO) agreements would be split between the UK and the EU. Because
of which there would be a dampening effect on the FDI (Dhingra et. al, 2016). In addition to
the above, there exist a number of coordination costs and complicated supply chain
procedures. With the leaving of the UK, and the above mentioned reasons, the FDI receipts
would be deeply affected, which would be further reflected in the UK global business and
trades statistics. Such losses of the investments would adversely affect the productivity of the
UK and the static income losses.
Another major sector that would be deeply impacted by the Brexit is the supply chain. The
supply chain is one of the essential elements for the competitiveness. These not only ensure
the lower prices, but also thereby aid in customer satisfaction and the timely deliveries. It
must be noted that the UK trade is majorly connected to the global supply chains. Some of
the industries of UK that are highly dependent on the supply chain are the telecom, financial
services, wholesale and retail sectors, mining and chemical products and obviously the
transport sector. The Brexit would lead disturbances in the global supply chains, and majorly

ESSAY 3
that of the UK. As a result of which the strategic investment decisions with respect to the
logistic capabilities, warehouses and the factories would be deeply impacted. If the ultimate
transaction costs become relatively high, the companies in UK would be forced to reconsider
their current locations at the UK. The companies based at the UK would reconsider not only
the supply chain decisions, but also other value chain decisions with respect to marketing,
sales, and research and development. As a result, a range of reconsiderations and strategic
directions shall follow, which might lead to the loss of valuable entities from the UK.
In addition to the above impacts, there would be significant impacts on the living standards
on the population of the UK. The living standards would be reduced following the fall in the
migration level in the nation (Dhingra, Ottaviano and Sampson, 2015). It is essential to note
that the labour market of the UK is greased with the aid of the flow of the migrant into the
country. The Brexit has already showed up the effect on the flow of such migrants. The
number of people at work has significantly fallen in the period between the months of July to
October, which in numerical terms is regarded as the steepest fall since the year 2015
(Wadsworth et. al, 2016). The decline in the inflow of such migrants in the country would
result in the further fall in the gross domestic product and the overall productivity of the
nation. The incidental impact of the same is the reduction in mobility in the UK economy and
the shortage in the skilled labour forces in the country. As the migrants are in search of the
housing facilities, the Brexit would result in the slowing down of the housing industry as
well. The most accurate measure of the living standards is the real wage growth. Eventually,
it must be noted that real wages have fallen consistently for the seventh month and in for the
month of December 2017 were at the rate that were in the May 2010 (Blanchflower, 2017).
Another major impact of the Brexit can be stated in the Transfer pricing. In simple words, it
can be stated that the Brexit would yield impact on the trade-based fiscal regulations. Post the
Brexit, the UK would no longer be the party to the EU fiscal statute (PWC, 2018). As the UK
was earlier the part of EU fiscal legislation, and member of the single market, the companies
engaged into the transportation of goods and services in different EU regions were required to
pay the taxes. However, with the fiscal legislation in practice, the companies were able to
avoid the double taxation in between the UK and the other EU member countries. Now the
transfer pricing regulations will be affected for the companies. This is because the EU
Arbitration Convention is a treaty among the member states only. The revision of the said
convention can only be engaged into by the contracting member states. Therefore, the issue

ESSAY 4
of the double taxation for the movements within UK organisations and the EU entities would
depend on the willingness and the viewpoints of such member states.
In addition to the above impacts, one major economic aftermath that took place immediately
was the falling the share prices of the chief banks and financial institutions of the UK. Stock
markets are one of the significant means to gauge the future economic impact of economic
and political changes like that of Brexit. As the value of the pound sterling dropped
significantly against the US Dollars, this eventually led to the down rating the credit score of
the UK businesses by credit rating agencies like Standards & Poor’s, Fitch Group, Moody’s
(Chen, 2017) . It cannot be said that the stock markets are the sole indicator of the future
economic trends, but it does represents the consensus view of varied numbers of the
economic players. Thus, the stock market’s information aggregation function, as represented
by the continuous rise in the inflation and the falling share prices indicate that the regulatory
and political changes because of Brexit have overall negative sentiments in the market. The
same would continue until specific political and economic regulations are not enacted.
Thus, as per the discussions conducted in the previous parts, it can be stated that as per the
analysis and the views of the various range of economists and the experts, the Brexit
referendum is likely to adversely affect the trade and the various economic facets of the
nation. In line of the discussions as carried in the previous parts, the work focussed on factors
like falling strength of trade, falling inflow of the foreign direct investments and the negative
impact in the migration of the workforce are some of the major outcomes of the UK leaving
the European Union. This is because, as stated above, UK was one of the major participants
as well as the beneficiary of the one of the major blocs in the world. As discussed in the
previous parts, it would be right to state that the UK’s overall economic growth will be
impeded post the Brexit. Though the eventual impact would be dependent on the fact that
how the trade relations turn out to be in future for the UK and the EU, the initial impacts as
seen in the falling housing markets, falling share prices of the chief banks, falling credit
ratings of the UK business are some instances. These taken together are evident of the fact
that a negative course of growth would follow for the country in the long times as well.

ESSAY 5
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