Brexit Economic Impacts Analysis

This assignment delves into the multifaceted economic repercussions of Brexit. Students are tasked with examining a range of academic sources to analyze the potential impact on various sectors, including finance, trade, and immigration. The analysis should encompass both immediate and long-term effects, considering diverse perspectives and potential challenges.

Running head: GLOBAL IMPACT OF BREXIT
GLOBAL IMPACT OF BREXIT
Name of Student:
Name of University:
Author Note:

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GLOBAL IMPACT OF BREXIT
TABLE OF CONTENT
INTRODUCTION:..........................................................................................................................3
DISCUSSION:.................................................................................................................................4
HISTORICAL BACKGROUND OF EUROPEAN UNION:.....................................................4
UK’S ROLE & IMPORTANCE IN PRE-BREXIT:...................................................................6
IMPACT OF BREXIT ON UK NATIONAL ECONOMY:.......................................................7
JUSTIFICATION OF THE DECISION:.....................................................................................8
POST-BREXIT FUTURE OF EU:..............................................................................................9
CONCLUSION:............................................................................................................................10
REFERENCE:...............................................................................................................................11

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INTRODUCTION:
In recent globalized world, the nations are compactly connected through business trade
and market participation. Any event in any corner of the world infiltrates the consequences
through all over the world that is where the analysis receives sits utmost importance.
One of the very recent global event has been BREXIT that is Britain taking an exit from
the European Union after almost 44 years of its joining in 1973. This definitely affects the
economic and political conditions of the UK as well as other EU member countries that have
been strongly linked to UK through trade and finance (Schiereck, Kiesel and Kolaric 2016). The
major concern of the discussion in the paper is how the decision of Brexit would affect the
economy of UK as well as other EU countries. The decision of Brexit would now allow UK to
connect to many of the countries lying outside of the European Union through the channel of
international trade and business This would certainly call for new dimension in the growth of
British economy.
It has been found that major impact of the decision on international trade has been
reduction in EU trade with UK whereas increase of UK trade with other non-EU nations (ft.com,
2016) There has been less immigrants post-Brexit situation that allows unemployment to be
managed properly (Ebell and Warren 2016). Another striking and instant impact has been
declining value of the pound as compared to dollar and euro. The impact of the decision has not
only affected the economy of UK but also the entire EU members nations as well as the countries
lying outside EU through the linkage of international trade.

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HISTORICAL BACKGROUND OF EUROPEAN UNION:
Based on Maastricht Treaty, the European Union was formed in 1993 unifying 28
countries of Europe economically politically. Almost over 510 million populations are included
in this union that sets its own rules and policies (Nunez-Ferrer and Rinaldi 2016). The economic
condition, political situation and society as whole of all the member nations are consider din
order to make laws that takes into the of the national law and security of the member states. The
power of the individual sovereign states is comprised in it. Through standardization of law and
order applicable to all of the EU countries there exist one single market that allows free
movement of goods and services, people and capital within all of the member states.
ORIGIN & HISTORY:
The history of origin of EU traces a long term gradual integrating process
starting since 1945. The formation of EU is backed by the demand of its member
countries. Post second world war Europe remained divided between largely democratic
western nations, Communists and soviet dominated eastern bloc. War devastated
Germany’s future direction of the rebuild spread fear among the nations that gave
birth to the idea of federal European union that would bind the nation into the
democratic institutions created in pan-European set up. The main idea was to stop
Germany from starting war with any other allied nations as well as put a resistance in
the expansion of communist in the east.
1945-1959
The motive behind forming EU was to end the seed of frequent wars between European nations
and its neighbors. In 1950, the effort of European Coal and Steel Community started uniting
these countries in terms of economics and politics to secure peace. Based on the Treaty of Rome,
Common Market or European Economic Community built up.

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1960-1969
This period was known as good economic period as the countries under EU brought down all
custom duties and charges to zero while trading with one another (Busch and Matthes 2016).To
ensure enough food supply and eatables available to individuals. The EU members agreed upon
joint control in the food production.
1970-1979
In 1973, UK along with Denmark and Ireland took membership of EU.
Policies regarding regional issues start transferring huge amount of money in poor areas with aim
of job creation and strengthening infrastructure. The influence of Parliament of Europe started
increasing. The adoption of laws by EU to protect environment and fight pollution was done.
1980-1989
The Single European Act in 1986 was signed that formed the basis of the six year log program
aiming to sort out trade related issues across EU borders with creation of single market
1990- 19999
Single market notion is completed with freedom of flow of goods series money and people.
Treaty of Maastricht (1993) and Treaty of Amsterdam (1999) came into form and shaped the EU
functioning. More members get added to EU like Sweden, Finland Austria.
2000 - 2009
Euro is made as new currency and adoption it among European Union countries become
widespread. Closer integration between members are ascertained through strong defense and
security to fight against crime. The financial crisis of 2008 hits the EU nations along with its
global impact. The Treaty of Lisbon making provision of modern way of functioning with
efficient institutions gets ratified.

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2010- Today
The global economic crisis hurts Europe. EU provided much support to the trouble stricken
countries to combat their difficulties and bring back economic stability. For that it established
Banking Union to make banks reliable amidst turmoil.
UK’S ROLE & IMPORTANCE IN PRE-BREXIT:
The greatest role and impact that UK economy has on European Union is the huge
contribution to its budget. The exit of the UK from EU has left a biggest question regarding how
to bridge the gap that is going to be created post-Brexit situation when UK stops to pay for the
bill. UK denides to pay bill worth 60 million euro that was charged by EU in order to
compensate for the commitments and liabilities share that UK has to pay pensions of its workers.
There are also many UK based projects which received funding approval from EU hence the
retrieval was needed. The departure of UK with no payment creates burden for the existing
members who are unwilling to bear it to compensate the share of UK. As per 2014 data, UK
possesses 4th rank after Germany, France and Italy as the national contributor to EU budget
(Nunez-Ferrer and Rinaldi 2016). The total made by UK was of 11.34 billion euros to the total
budget of 116.53 billion euros. In 2015, this figure reached to 18.20 billion euros out of a total
of 118.60 billion euro being the 3rd largest contributor. Not only UK contributes but also receives
funding from EU. The amount of fund received by the UK is invested mostly in the development
projects in the region and upgradation of agriculture. Moreover the funds of EU are used in
combating terrorism, create employment and invest in different projects going on in non-EU
countries. The administrative expenditure incurred after all the institutions and schools run by
EU for ites employees children are also included in the budget.

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The UK also provides greater labor force participation in EU institutions as well as the
nation .falling under it. The average share of nationals of UK working in EU is around 4.2%. Out
of 45,845 employee 1800 belongs to UK nationality consisted of permanent as well as temporary
staffs employed in EU. European Commission employs 52 UK based staffs and 17 members are
employed successfully in the Parliament of Europe. The exit bill declares relocation of EU
institutions established in UK. All the EU agencies set up in UK needs to be moved back.
Another important role UK exert on EU is its total trade as almost 50% of the EU trade has UL
as destination. The EU member countries are greatly linked with UK in form of export and
import thus U playing important role in their national economies.
IMPACT OF BREXIT ON UK NATIONAL ECONOMY:
David Cameron, the former prime minister of UK forecasted an economic downfall post-
Brexit situation and he was totally in favor of carrying out the membership. The referendum of
Brexit coming into operation first hit the national currency very bad (Coyle 2016). It steeply
declined and reached 10% low as compared to dollar and 15% low as compared to euro. The
greatest factor motivating Brexit decision has been alarmingly high amount of immigration in
UK which is expected to remain still much higher even after successful exit taken by UK (Portes
and Forte 2017). This is due to a large ratio of European nationals are dependent on economy of
UK to earn livelihood. The major impact on the economy of UK post Brexit would be fall in
national exports and imports (Economist.com, 2017). UK is the largest trade destination for the
EU members as a result the trade relation would be hampered by great extent. Post Brexit cost of
trade faced by UK would rise as it won’t gain the benefit of reduced custom duty and other taxes
that were relaxed earlier within EU nations. The loss of trade is evident hence stemming from
higher tariff and non-tariff barrier implemented in the international trade. This further reflects in

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to reduction in the national income of the country reducing GDP and growth of GDP as well.
The decision of Brexit imposes more property risks in the market for property that faces huge
uncertainty. Brexit is expected to generate volatility mostly short term though there is possibility
of positive improvement in the long run. In terms of FDI the country is still attractive destination
that has kept the confidence of investors high and robust. The growth of the economy is
estimated to be 1.8% in 2016 following Germany that records 1.95 growth rate among the
industrial countries of G7 (Mendez-Parra, Velde and Winters 2016).
In the history of the British international relation, the referendum has been significant
incident having far-reaching impact on the domestic as well as global economy. The Brexit
decision has been able to instigate the political scenario of the whole Europe. A recent poll
conducted by YouGov suggests majority of six countries out of 7 have wished to take an exit
from the EU. Majority of European population believe that post-Brexit the exit of the nations
would raise (Dhingra et al. 2016). In opinion of the political risk analysts, the broader picture of
the effect of referendum is beyond the the worldwide presence of euro skeptic and populism. The
referendum provokes nations under EU to take decision of leaving though the process would not
be that immediate and fast track due to the complex legalities involved in leaving process of EU.
JUSTIFICATION OF THE DECISION:
The net outcome of the BREXIT decision is vague as there are some pros as well as cons
of the decision that have come out clearly. The exit is going to hurt the EU economies very hard.
The share of UK’s contribution in the EU budget, huge volume of trade incurred with EU by UK
and large number of UK workers in the EU firms play important role, which is now going to be
affected, and disrupted leaving harsh impact on the countries connected globally with UK
(Ottaviano, Pessoa, Sampson and Van Reenen 2014). But this decision to some extent carries

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benefit for the nation too in form of lesser immigrants into the country that worsens the
unemployment problem of the nationals. Moreover EU countries are less in numbers compared
to various non-EU countries with whom UK now can be connected through trade. The trade
volume would increase and that would further increase the revenue earned by UK (Colantone
and Stanig 2016). This would boost the overall health of the economy. The decision of leaving
single market in order to participate in the larger global market hence totally justified.
POST-BREXIT FUTURE OF EU:
There are two types of Brexit existent and differs watt s very terms and condition
underlying the draft of the decision. The hard-brexit indicates UK’s leaving the entire EU which
is driven by single market mechanism. Leaving the market would dismal the market balance and
bring instability channelized through reduced trade transactions taking place between nations
(Wadsworth, Dhingra, Ottaviano and Van Reenen 2016). The trading partners of Britain would
suffer loss of trade along with Britain who incurs higher cost of trade if it continues trade with
European countries. Hard-Brexit would induce the country carry out international trade under the
World Trade Organization regulations (Dorling 2016). This calls for more UK participation in
the global trade beyond the only nations listed in EU.
Comparatively, Soft-Brexit makes provision of staying in single market even after UK exiting
from EU (Kierzenkowski, Pain, Rusticelli and Zwart 2016). Application of multi sector
multicounty general equilibrium model, it has been estimated that the Brexit would cause
downfall in the welfare by 2.6% (Anderson and Rogerson 2016). The benefits of the Brexit in
form of lower immigration, better regulation and more trade with non-EU countries can actually
create lesser impact to offset such loss that in presence of dynamic model shows great loss in the
welfare almost by 9.5% incorporating productivity effects.

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CONCLUSION:
The decision of Brexit is one of the most influential and crucial phenomenon in recent
time of globalised economy. Globalization binds the economies of nation through activities like
market participation trade and business. European Union is epitome of grouping of worlds
developed nations that enjoys transactions in single market standardized and driven by its own
rule and law. UK has been one of the important member nations that has higher impact in the EU
economic conditions as whole. Not only through trade but also through contribution made to EU
budget and large UK nationals working in EU offices and institutions. The decision of Brexit hit
hard at the heart of EU through all these. On the other hand much debate has arisen out of the
impact of Brexit that estimates positive sign for economy of UK. Increased trade with world
economy and more GDP growth is up coming to the nation. The general unemployment problem
would be taken cared of by the this decision as excessive immigration would be restricted as well
as more income would boost consumption and chain wise more production and GDP.

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Good in the National Interest. Policy Paper, 89.
Busch, B. and Matthes, J., 2016. Brexit-the economic impact: A meta-analysis (No. 10/2016).
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Colantone, I. and Stanig, P., 2016. Global competition and Brexit.
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foreign investment in the UK. BREXIT 2016, p.24.
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catastrophic event.
Ottaviano, G.I.P., Pessoa, J.P., Sampson, T. and Van Reenen, J., 2014. Brexit or Fixit? The trade
and welfare effects of leaving the European Union.
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Schiereck, D., Kiesel, F. and Kolaric, S., 2016. Brexit:(Not) another Lehman moment for
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