Challenges and Opportunities of Brexit for UK Aviation Industry and Growth Slowdown Faced by UK

This document discusses the challenges faced by the UK aviation industry post-Brexit and the potential growth slowdown faced by the UK economy. It also explores the opportunities Brexit presents for the UK and Israel. The document provides insights into the negotiations and trade agreements that the UK will have to navigate in the post-Brexit era.

Governance of European
Union

TASK 2
The below presented is the evaluation done of the challenges and opportunities in the
concept of BREXIT:-
 Challenges
Post BREXIT- Issues faced by UK aviation industry: A set of very serious challenges
have been faced by the airlines sector in Britain, although the long-term outlook might not be as
gloomy as some fear. In June 2016 the stocks of the aviation industry tumbled down as the
Britain voted in favour of leaving the EU, and also the shares of International Airlines Group
(IAG), which is the parent corporation of British Airways plunged by approximately 30% in the
first three training days following the vote. Some of the other airlines industries also suffered a
similar rate of decline such as Budget airlines, easy jet and Ryanair, while Lufthansa were worth
17% less at the end of the month as compared to the EU was elected. In whole the the influence
of BREXIT on the airlines industry is uncertain (Benington and Geddes, 2013). For instance
potential European economic slowdown, negotiations over Brexit and the future regulatory
landscape for aviation are the issues in short-run. IAG expected that UK's vote in favour to leave
the EU will not cause any sought of long-term materialistic influences on the business, although
it experienced a weaker than expected trading environment in the run-up to the vote.
The airlines industry's main trade group is International Air Transport Association
(IATA) estimated that British-air passengers count will fall approximately up-to 3.5% for the
upcoming four years. Post July IATA reported that growth in passengers traffic has already
declined in May as compared of early 2016 and further the Brexit vote will complicate the things
more. Airlines sector plays a significant role in supporting the development and growth. The post
Brexit frame work is negotiated between UK and EU and there are no steps backward of
connecting the aviation sector (Richardson and Mazey, 2015). A fully liberalised and deregulated
airlines market within the UK and Europe, which determined that all the European and British
airlines can continue to operate their business as they are presently doing, and this is to be
considered as one of the crucial points in UK authorities which will have to be negotiated with
their European correlatives. The influences of Brexit would be virtually neutralised and Britain
will regain the access to European Common Aviation Area, which restricts the access to airlines
over the EU airports in the same way the passport banking system allows banks in EU economies
to operate across the association. However, Britain will fail to remain within the single market, it

could be forced to settle for a co-operation agreement or a traditional bilateral treaty which is an
air transport agreement with the EU which will provide the UK more control in terms of policy
but could also see its market access restricted and, crucially, could make flying between the UK
and Europe a lot more expensive (Vogel, 2006).
On the basis of the results and the outcomes of the negotiations, it is likely that loss of
operational flexibility and of higher costs which will be faced by the pan-European carriers
which is likely to lead to higher airfares and potentially fewer flights. Brexit could still have its
silver lining, for while the Britons travelling abroad will be less for a week and which will bring
more foreign visitors to the UK. London is among Europe's most popular destinations, and
travelling to the UK from the US is 10% cheaper than it was a month ago. A need for
renegotiating the airlines agreement will be there fo0r the UK with many other countries
including the US There may also be a need for the UK to renegotiate airlines agreements with
many other countries including the US and Canada, which are currently covered by EU-level
agreements, PWC director Gwyneth McLeod told IB Times UK (Jeffery, 2015).
Growth slowdown faced by UK :
 For the growth slowdown in the upcoming years Britain should arm itself as the decline
in the consumers spending and business investments will apply a stop to the economy of
UK. For instance the UK economy will produce GDP growth of approximately 1.9% this
year, fuelled by 2.5% rise in purchasing power of consumers on the back of low
inflation. However the performance is estimated to be aborted out as inflation will jump
to 2.6% next year and 1.8% in 2018 which will bring a decline in the consumer spending
of about 0.5% and 0.9% respectively (Hallerberg, Strauch and Von Hagen, 2007).
 The double Whammy impact will cause UK GDP sharply decline the growth to 0.8%
next year, before rising to 1.4% in 2018. As inflation returns it will minimize the income
levels and purchasing power of the public. A period of relatively low growth has been
faced by the UK economy which has build pressure on consumers and the cautious
approach to spending by businesses. The Office for National Statistics revised up its
reading for the UK economy in the run-up to the Brexit vote, with a development in the
GDP up-to 0.7% in the second quarter which was more as compared to the previous
estimate of 0.6% for the period. The value of sterling has declined up-to 18% against the
US dollar as the UK’s main economic indications held up since Britain voted to exit the

EU. The report prepared by the EY Item Club analysed a weak pound would cause a
development in exports by 4.5% in 2017 and 5.6% 2018. It was also evaluated that net
exports are estimated to add 0.8% to GDP next year, accounting for nearly all of the
expected developments in the UK economy (Sabel and Zeitlin, 2010).
 The domestic market flat activities will bring a growth in GDP and which will become
heavily dependent upon exports for the upcoming year, but after the exit of UK form the
EU's certain sectors, for e.g. aerospace, chemicals and auto-mobiles, that trade
extensively with the EU will be a lot more exposed and will face a need to be supported
by subsidies and more booming industrial policies.
Excruciating challenges of taking back control:
After Brexit the UK will have to negotiate at least minimum six deals to regain its
position in the sector, Grant of the Centre for European Reform Think-tank. Negotiations will be
far longer and more complicated beyond the realisations by British politicians. The following are
the set's which covered Britain’s EU divorce, the second contains the agreement of free trade
with the European union and a third is developed to carry out interim measures, the fourth on the
Grant’s list is about full membership of the World Trade Organisation, fifth has replaced the
trade deals which is enjoyed by the UK as an EU member and the last is sixth which will be to
differentiate the UK’s future relations with the European union on topics such as foreign,
defence and security policy. At the same time, the British government will have to work out how
to keep the country united. Then there is resetting a collection of policies and norms across
sectors which includes science and research, farming and fisheries, environment and support for
poorer regions. The huge and complex will be managed by a civil service that has reached a
postwar low in staff numbers against the backdrop of an economy teetering on the brink of
recession (Benington and Geddes, 2013).
The UK will have to make developments on a new commercial relationship with the EU.
Next task considered for the governing bodies in their to-do list is re-establishing trading
relationships with all major trading partners outside the EU. Full membership of WTO will be in
need to be regained by the UK and re-signing of approximately 39 trade deals covering 65
countries negotiated by the EU. WTO was joined by Britain in 1995 under the umbrella of the
EU, which specifies the member states in global trade. Key aspects of the EU’s terms of trade
could not simply be cut and pasted for the UK was strictly warned by the WTO. In order to re-

establish its authorization in the WTO, approval of 164 members from Afghanistan to
Zimbabwe. Most observers do not see this as an impassable barrier, while the other countries can
use the opening to seek better trade terms or as leverage on something else. The history of the
WTO shows that things can move very slowly and other factors, beyond the intrinsic merits of
whatever the trade deal is, can come into play (Bache, 2007).
British trade negotiators will be getting into the mind-astounding acne of WTO
agreements governing tariffs and subsidies, known as schedules. One of the first questions is
what happens to the EU schedules. For example, EU can import 58,000 tonnes of top-quality
steak from South America under WTO rules, but no one knows how much of that share belongs
to the UK. So there will be a need of three-way communication and negotiation between, the
WTO and the EU. The For keeping the British ties with other 65 economies which have a trade
agreement with EU the officials from newly created trade departments will be jetting around the
globe (Eberlein and Newman, 2008). Opportunities
Brexit as an opportunity for Britain and Israel:
A long and complicated process is of parting UK itself from the EU. The way by which
the illumination of the possible implications of the leap into the dark is by analysing the likely
shape of the UK’s post-Brexit link with the current position of Israel which is a proudly
independent economy with a dynamic globally engaged economy, which however maintains a
strong tie with the European Union and which is at the sharp end of the major challenges to
global security. Although Britain’s policy towards Israel has not primarily been driven by its
membership in the EU, the relationship will be enhanced by post-Brexit (Torres, Pina and
Acerete, 2006). The bilateral relationship with Israel has always been more favourable than its
relationship with Israel mediated through the EU framework. Israeli and British security have
been considered by the governing bodies to be linked due to the threat posed by radical Islamists.
However Israel was supported by UK especially regarding the Israeli Palestinian conflict which
was sometimes negotiated away on a multilateral level due to other priorities within the EU and
by considering Brexit the factor will also be diminished.
After Brexit the reality will incentivise the UK to search for economic trade partners
outside the EU and Israel can be posed as an attractive option due in part to its well developed,
innovative and hi-tech sector (Telò, 2013). Despite the campaign for boycott, divestment and

sanctions (BDS) against Israel, and for some cases the response to the campaign and with a
greater level of trade and scientific co-operation the economic links between the nations has
developed over the last decade. But still it is not clear how much of this relationship will have to
be renegotiated as key components of these links are defined via multilateral agreements with the
EU. Some of the suggestions regarding Israel’s current links with the EU which constitutes more
positive agreements than any other non-EU economy and which will consists of a free trade
agreement without freedom of movement and which could be an appealing model for a
upcoming UK and EU relationship. However, Eu and Israel contracts does not include the
financial sector, which is the most significant economic issue for the UK (Kirchner, 2006).
The relations of Israel with the EU are also highly isolated from the result of election.
From one side, Israel will losing the UK, as a voice raising Israeli security concerns in Brussels.
Moreover, the significance of the migrant crises and the economy within Europe means that
while dealing with the Israeli-Palestinian issue the EU will have less energy. Economic
pragmatism is likely to weight more heavily than ideology. For instance, the Greek government
led by a far-left wing party which supported BDS while in opposition now has very close
relations with Israel as it sees Israeli tourists as helping the stuttering Greek economy while also
viewing Israel as a potential partner for energy co-operation in the Mediterranean.
Key opportunities offered to reboot UK economy:
The Bank of England will be swinging back into action with measures to cure the
economy through after the Brexit period. Interest rates will be minimised form their already
historic decline of 0.5%. By generating more electronic money in the economy and which could
ease the credit conditions in the country. The Treasury is also preparing up to provide stimulus
measures. One of the biggest of Brexit is that it allows the economy to be rebooted. That is true
after any severe economic shock, which certainly applies to the decision to leave the EU. The
last time UK policymakers had the chance to implement root and branch cures to the economy’s
structural weaknesses was during the financial and economic crisis of 2008-09. Relying almost
totally on the Bank of England to support activity through interest rate cuts and the money-
creation programme known as quantitative easing (QE) (Wallace, Pollack and Young, 2015).
Funding for Lending, under this the Bank provided incentives for high street banks to
lend more to households and businesses. Driving up the asset prices and housing are the impacts
of all this.. A boost has been experienced in the economy, but the benefits were mostly felt by

the haves rather than the have nots. It was business as usual rather than change of the sort seen,
for example, after the Great Depression of the 1930s or the oil shocks of the 1970s.
Monetary policy's biggest advantage it stimulates the activity in the quickest ways, which
is why the Bank is the first line of defence against a post-Brexit recession. Moreover from
sending out the message that Thread needle Street has a steady hand on the tiller, it is not
obvious why easier monetary policy should have a marked effect on the economy. Interest rates
have been continuously constant at 0.5% from more than seven years, so bringing them to 0.25%
or even to 0% wont make much difference. Likewise with another £50bn worth of Quantitative
easing, on top of the £375bn that was introduced to the economy during the Great Recession and
for the upcoming years (Jeffery, 2015).
Fiscal policy is the Treasury’s job. It is sophisticated method of determining the changes
to tax and public spending. When the economy was floundering after the collapse of Lehman
Brothers in 2008, to raise demand Alastair Darling minimized VAT and brought up
enhancements and improvements in infrastructure projects. The Treasury has preferred to let the
Bank of England do the heavy lifting. Fiscal policy has been tighten whereas the Monetary
policy has been loosened up. The Great Recession left the UK’s public finances in a heck of a
mess has been the justification for the conservative approach to fiscal policy. The budget deficit,
which is concerned with the difference between tax receipts and spending in any one year, and
the national debt, which is an accumulation of all the deficits (and rare surpluses) over time are
the two main parts of a nation's financial health. Britain’s budget deficit hit a peacetime record
during the Great Recession, while the national debt more than doubled (Cini and Borragán,
2016).
The nitty-gritty theory is involved in the structural reform that makes the economy work
more effectively, whether children are being provided with a right sort of education so that they
can will be able to fine decent employment, the state of the country’s infrastructure, in this
concept an entrepreneur with a good idea can find long-term finance. In the 1980s, there was a
tendency to equate structural reform with smashing the trade unions and privatising the
nationalised industries. Real structural reform goes deeper and requires something that has
typically been in short supply in Britain patience (Wagnsson, Sperling and Hallenberg, 2009).
Opportunity for Britain and Israel:

Security cooperation is also likely to continue. The return of foreign fighters from Syria
can be faced as a significant threat for the UK and European states and can learn much from how
democratic Israel has coped with the threat of home-grown terrorism. By maintaining the
credibility of its underlying commitment to a two-state solution the economy of Israel needs to
do its try to develop and enhance the security co-operation with European countries. But in
return it will expect the EU to show greater understanding of the threats it faces. For example,
Hezbollah has 100,000 rockets that could create severe disasters to the parts of Israel’s vital
infrastructure and which turn into a war suffering form huge civilian casualties for both the
economies of the Lebanese border. Yet, whereas the Arab League recognizes both Hezbollah
political and military wings as terrorist organisations, the EU continues to view its political wing
as an appropriate (Benz and Papadopoulos, 2006).
The weakening of the EU Commission’s federalist vision is not necessarily negative from
Israel's perception. It is demonstrated that Israel is a way far from the only democracy that wants
to be a nation state. However, the weakening of the EU, NATO, and a more isolationist US
would be strategically problematic for both Israel and the UK, because that vacuum would be
filled by Russia, Iran, China, and groups such as Isil. A US Administration ambivalent about a
weakening NATO – perhaps under a Trump Presidency coupled with an EU that ultimately
breaks up into its component parts, would pose significant challenges for both countries.
Golden opportunity for stronger US-UK trade ties:
 A world tour aimed at building new trade ties outside the European Union has begun by
the, chancellor, which has urged US investors not to turn their backs on Britain.
 A meeting was carried out to discuss the ramifications of Brexit on trade links (Aspinwall
and Greenwood, 2013).
 It was also founded that being at the forefront of open trade in the last 200 years and
pursuing a stronger relationship with our biggest trading partners is now a top priority.
 The New York visit will be used to present the referendum vote as a golden opportunity
for US investors to develop even a relationship with Britain.
 The largest single destination for British goods is the US, which makes up-to17% of
exports at a value of approx £88bn in 2014 (Jordan, 2012).
 While Britain’s decision to leave the EU clearly presents economic challenges, just to
make the UK the most attractive place in the world to do business,

 A bid to boost the country’s attractiveness to foreign firms it has been pledged to cut the
corporation tax rate to 15% or lower. Britain may be leaving the EU but not quitting the
world. The economy will continue to be a beacon for free trade, democracy and security,
more open to the world as compared to earlier.
 Overtures are managed to major economies about potential trade deals, travelling to India
last week for preliminary talks with government officials (Wurzel and Connelly, 2010).
 Trips to the US, China, Japan and South Korea over the next few months have been
scheduled. The government has said it plans to hire up to 300 staff in a bid to address a shortage of
trade negotiators capable of forging closer economic ties with dozens of other countries.
Opportunities for UK scientists:
EU funding and the free flow of talented researchers across Europe are the benefits which
had enormously effected due to the Britain's scientists. The benefits of continued membership of
the bloc outweighed the costs, and would have preferred that the UK had voted to remain, in the
election in June. There were many disadvantages and important now how best to develop and
improve science in the longer term as the UK prepares for Brexit. Beyond funding issues the
opportunities will be extended (Schreurs and Tiberghien, 2007). Fundamental differences are
found in the cultural, ethical and philosophical environment in the UK compared to many
European countries. Britain is more inclined towards a relatively liberal risk which is based on
regulatory environment that allows fields to move quickly to reflect on ethical issues but not to
over-regulate.
A record of deep regulatory conservatism, attempting to legislate and control many
aspects of science that are not deemed in the UK to present a significant danger is by the
European Union. Consider clinical trials. In the early 1990s Britain was recognised as one of the
best places in the world to test new drugs on patients. Decisions were quick and bureaucratic
obstacles were few (Vogel, 2006).
The introduction of the European Clinical Trials Directive in 2004 ended all this.
Needless regulatory hurdles associated with huge inefficiencies and delays in effect killed off the
clinical trial industry in the UK, where it declined to just 2 per cent of global trials.
Regulatory constraints from the EU do not relate only to clinical trials but also the
European approach to the use of data for research purposes is excessively restrictive, a far cry

from the UK framework laid out in July (Benington and Geddes, 2013). Free of restrictive
regulation and similarly, in stem cell research Britain stands almost alone in Europe in its
approach to the field. Much the same could be said of the research and application of genetically
modified crops, vaccines or genomics. Being constrained by EU restrictive regulation in the
future is a clear liability. Add to this the constraints on state aid, which inhibit the UK’s ability to
support the science-based industries more directly as the Americans do, and we can see that a
future in which British scientists collaborate with their European counterparts but are not bound
by EU regulation looks tempting. Industrial strategy needs to be incorporated in the areas of
strength and in the research base including life sciences, energy, digital and data. In case UK gets
separated from the EU regulatory system, changes must be brought in the way these industries
are governed, in line with the philosophy of low regulatory burden, risk-based regulation and
speed. A failure to implement sweeping changes to regulation and its institutions in the UK
would be to miss an important opportunity (Richardson and Mazey, 2015).
For making Britain a global leader in life sciences, data, genomics, regenerative medicine
and other innovation-based fields, regulations needs to be touched in similar way to Switzerland
so that. State aid and industrial policy should be routine. The academic sector should be
developed, with universities encouraged to pursue pure subjects while expanding in those areas
that allow for the professional applications, such as engineering. There is some hope that the
government shares these aspirations. If it does, then this small country could, on its own, succeed
in converting science and innovation into economic growth (Smismans, 2006).

REFERENCE
Books & Journals
Aspinwall, M. and Greenwood, J., 2013. Collective action in the European Union: interests and
the new politics of associability. Routledge.
Bache, I., 2007. Europeanization and multilevel governance: cohesion policy in the European
Union and Britain. Rowman & Littlefield Publishers.
Benington, J. and Geddes, M., 2013. Local Partnership and Social Exclusion in the European
Union: New Forms of Local Social Governance?. Routledge.
Benington, J. and Geddes, M., 2013. Local Partnership and Social Exclusion in the European
Union: New Forms of Local Social Governance?. Routledge.
Benz, A. and Papadopoulos, I. eds., 2006. Governance and democracy: comparing national,
European and international experiences. Routledge.
Cini, M. and Borragán, N.P.S., 2016. European union politics. Oxford University Press.
Eberlein, B. and Newman, A.L., 2008. Escaping the international governance dilemma?
Incorporated transgovernmental networks in the European Union. Governance, 21(1),
pp.25-52.
Hallerberg, M., Strauch, R. and Von Hagen, J., 2007. The design of fiscal rules and forms of
governance in European Union countries. European Journal of Political Economy,
23(2), pp.338-359.
Hallerberg, M., Strauch, R. and Von Hagen, J., 2007. The design of fiscal rules and forms of
governance in European Union countries. European Journal of Political Economy,
23(2), pp.338-359.
Jeffery, C. ed., 2015. The regional dimension of the European Union: towards a third level in
Europe?. Routledge.