Impact of Brexit on Business, Trade, and Travel.

Running head: IMPACT OF BREXIT ON BUSINESS, TRADE AND TRAVEL
IMPACT OF BREXIT ON BUSINESS, TRADE AND TRAVEL
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IMPACT OF BREXIT ON BUSINESS, TRADE AND TRAVEL1
Literature Review:
Brexit is basically an abbreviation that stands for “British Exit” and this abbreviation
refers to the decision taken by the United Kingdom in the year of 2016; in the referendum of
23rd June, 2016, UK decided to exit the European Union or EU. The result of the vote defied
all expectations and it shook the global markets that eventually caused British pound to fall to
the level that is considered to be the lowest against the dollar in the past 30 years. At the time
of leaving, around 52% of the British people voted in favour of Brexit; although this leave
campaign mostly focused on emotional arguments regarding facts about immigration, yet
there are several reasons put by those who favoured this campaign and they believed it would
actually benefit the United Kingdoms1. The most common argument that supports the concept
of Brexit is that, people think that the European Union threatens the sovereignty of the
British. Some critics were also of the opinion that the regulations of EU have become
increasingly burdensome for the British. There are also arguments against the EU that they
establish corporate interests and prevented reforms of the radical; along with that, it is also
seen that the EU allows too many immigrants and their Eurozone was also not a big success
either. Thus, there are ample such reasons which led the UK to leave EU and this Brexit not
only impacts on the economy of UK but the business, trade and travel too.
Brexit has been a significant source of uncertainty for several UK businesses. There
has been an estimation that it led to 6% reduction in the amount of investment during the first
two years after the referendum occurred. The employment was also noticing to be 1.5% lower
and there were chances that Brexit would likely reduce the future productivity of UK by half
a percentage through a batting average effect of the output which was being relocated away
from firms with higher productivity towards the firms with lower productivity. Majority of
1 Gudgin, Graham, et al. "The macro-economic impact of Brexit: using the CBR macro-economic
model of the UK economy (UKMOD)." Journal of Self-Governance and Management Economics 6.2
(2018): 7-49.

IMPACT OF BREXIT ON BUSINESS, TRADE AND TRAVEL2
businesses anticipate that eventually Brexit will reduce the sales and increase the costs.
According to a researcher, Brexit is a significant as well as growing source that indicates the
uncertainty for firms and around 27% of the CEOs and CFOs admitted that Brexit was in fact
one of the top sources of uncertainty2. Again, as per the opinion of a scholar, the businesses
have expectations from Brexit that it will eventually lead to lower foreign and domestic sales
and impose higher costs3. There are also estimations that Brexit would have a negative impact
on exports, but the unit costs, financial costs and the labour costs were expected to rise.
Brexit, as a matter of fact, has reduced the investment and helped in the growth of
employment in the field of business. The empirical survey data showed that Brexit as a
source of uncertainty impacted on lower investment growth than those businesses that
thought Brexit uncertainty as of not much importance4. There are scholars who stated that
Brexit has the capability to lower the productivity growth of a business in the future; the
scholars state that Brexit would have more adverse impact on the sales of the business5.
Brexit has also affected the trade flows between the EU and the UK; it had led to the
opening of a free internal market. In accordance to the current scenario, the EU countries gain
in huge terms from the single market of EU. The benefits include absence of any kind of
quotas and duties for the member states of EU who are doing business and also are trading
throughout the EU. The after- effects of Brexit had significantly increased the cost of trade
between United Kingdom and the other remaining EU states and it will be damaging for both
the parties. There are certain sectors that has more impact because of Brexit than others; for
instance, the motor vehicle parts, electronic equipment and processed food’s export have
2 Hohlmeier, Michaela, and Christian Fahrholz. "The Impact of Brexit on Financial Markets—Taking
Stock." International Journal of Financial Studies 6.3 (2018): 65.
3 Dhingra, Swati, et al. "The impact of Brexit on foreign investment in the UK." BREXIT 2016 24.2
(2016).
4 Shroeter, Ulrich, and Heinrich Nemeczek. "The (Unclear) Impact of Brexit on the United Kingdom’s
Membership in the European Economic Area." European Business Law Review 27.7 (2016): 921-958.
5 Bloom, Nicholas, et al. The impact of Brexit on UK firms. No. w26218. National Bureau of Economic
Research, 2019.