IMPACT OF BREXIT ON NON- EU MEMBER STATES ICELAND AND NORWAY

Running head: IMPACT OF BREXIT ON NON- EU MEMBER STATES ICELAND AND
NORWAY
Impact of Brexit on Non-EU Member States Iceland and Norway
Name of the Student
Name of the University
Author note

IMPACT OF BREXIT ON NON- EU MEMBER STATES ICELAND AND NORWAY1
Introduction
One of the largest economies of the world Britain or United Kingdom (UK) decided to
leave the customs union and single market of the European Union (EU), which is known as the
Brexit. However, there exists uncertainty related to the Brexit as the deal has not been finalized
between two parties (Gov.uk 2020). The relationship of the UK with member countries of the
EU will depend on the nature of the deal between UK and EU. In addition, other than member
countries of the EU, there will be also an impact on the non-EU member countries. The Brexit
may also influence the growth of the business, trade and the overall economy of the UK. The
important trading partners of the UK from the non-EU member states include Norway and
Iceland. Therefore, there is a high possibility that the trading relationship between the UK,
Iceland and Norway will be affected because of Brexit. In this regard, to strengthen the future
trade relationship between the UK, Iceland and Norway, they signed a trade agreement on 2nd
April 2019, which will be applied post-Brexit (Ons.gov.uk 2020). The volume of total trade
between Iceland, Norway and UK stood at 30.6 billion pound as of 2018. Hence, uncertainty and
disruption caused by the Brexit will influence relationship between these countries.
Body
The growth of the trade and business will be adversely affected by the uncertainty and
disruption caused by the Brexit. The uncertainty prevails in the market will scale down the
confidence of the businesses and investors (Sitter and Sverdrup 2017). As a result, various firms
will have to go through closure of many existing units in UK as well as outside the UK. It will
downgrade the economic growth of the UK and the major trading partners such as Iceland and
Norway will also witness economic slowdown. Brexit uncertainty led to the weaker pound,

IMPACT OF BREXIT ON NON- EU MEMBER STATES ICELAND AND NORWAY2
which induces the share prices of the companies in the UK. Thus, it results in poor revenue
generation for the UK companies by trading with the rest of the world.
The intensity of the effect on countries can be measured on the basis of the trade
exposure of these countries with the UK. As, the volume of trade may affect post-Brexit, it will
hamper the overall trade growth of these countries. However, there may exists advantages and
disadvantages in terms of trade for the countries participating in trade. In the post-Brexit period,
the reintroduction of the custom borders will impose a new cost along with trade disruption. In
such scenario, the loss of time may also arise from the cross border transaction (Gov.uk 2020). In
order to, continue trading with the Norway and Iceland after Brexit, UK signed an agreement
with these two countries on 2nd April 2019, which will be active after Brexit. In 2017, the trade
volume between the Norway and UK witnessed at 30 billion British pound. In addition, the
Norway may also get benefitted from the alternative locations and surge in investment flows in
the long run. Another aspect that should be taken into the consideration is advantageous position
of the Norway that may be used as the EU common market for the foreign companies. The best
way to keep the UK in the single market of the EU even after Brexit is through European
Economic Area (EEA) (News.bbc.co.uk 2020). Hence, it will enable the UK to keep the close
relationship between the EU member states and Norway and Iceland. Furthermore, the European
Free Trade Area will also ensure the inclusion of the Switzerland in the Norway-plus option. It
will result in lowering the negative effects of the Brexit. Though, the UK need to agree with the
terms of the EU related to people, goods, competition, capital, and services. It will also increase
the chance of the UK to join the European Free Trade Association along with Norway and
Iceland (Dhingra and Sampson 2016). Thus, in the North Atlantic, a new triangle of the countries

IMPACT OF BREXIT ON NON- EU MEMBER STATES ICELAND AND NORWAY3
will form. It is possible for the UK to strike a third country trade deal and limit immigration
through Brexit.
Though, the UK will stay out of the common agriculture, Lisbon Treaty, customs union
and fishery policy of the EU due to the Brexit, there is a possibility of close association between
these two parties post-Brexit (Kierzenkowski et al. 2016). Therefore, it will allow the UK to
operate with the all countries of the EU in the financial and service sectors. The smooth
transition of the Norway option will benefit the economy of the UK in the long run. As a result,
it will assist in clean break and fast re-entry even after Brexit. Additionally, it can stated that the
trade linkages between the Norway, Iceland and UK will be less affected due to the Brexit. It
will facilitate the industrial supply chain through less disruption, which in turn foster the
industrial supply chain over services.
The overall growth of the countries may take a downturn as the Brexit may result in
lower exports and imports between the UK and non-EU member states such as Norway and
Iceland. Hence, it will plunge the economic growth of the countries as a whole (Daðason 2018).
In order to examine the economic growth of the UK, Iceland and Norway and its impact on the
world growth, the below data is taken into consideration.