Being outside the EU decreases the bargaining power of the UK

Politics and Political Economy
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Contents
Essay:......................................................................................................................................3
“Being outside the EU decreases the bargaining power of the UK”...............................................3
References........................................................................................................................................9
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Essay:
“Being outside the EU decreases the bargaining power of the UK”
The essay explores key implications of UK’s exit from European Union in relation to
decrease in bargaining power of UK. Entire UK benefits through trade agreements between EU
as well as other global powers since it is a member of EU. The EU as whole has more bargaining
power because it is world's largest economy. As a result, if the UK leaves the EU, it will lose
bargaining influence including free trades with other EU states. If the UK attempts to re-establish
trade agreements with other nations, they can encounter less desirable outcomes. Brexit
instability also creates volatility and has an effect on companies operating in United Kingdom. In
the event of hard Brexit, tariffs would be imposed on products as well as services, raising the
costs of importing raw materials and exporting finished items. The pound hit a 31-year bottom
on day of referendum result. This represented investors' worries about the UK's post-Brexit
future. The pound improved over next years as investors adjusted to news. The pound fell once
more after Brexit transition proposals were announced and repeatedly rejected. Although lower-
value currency enhances exports, pound's volatility reflects investor scepticism. This also makes
buying United Kingdom fixed-income assets repulsive, as well as FDI is likely to drop
(Schimmelfennig, 2018).
Tariff uncertainty triggered a 46 percent drop in UK car sector in year 2017 and an 80
percent drop over 3 years. Though Brexit wasn't the sole cause of the drop, it did serve a
significant role. Components are imported from the Europe, and the bulk of completed vehicles
are exported to Europe. Automobile manufacturing factories in the United Kingdom can become
unprofitable when vehicle imports tariffs are imposed. The supply chain will be affected by
Brexit. Financial services sector has also been severely affected. Since the EU has passed several
banking regulatory rules, Brexit would placed UK's banks in a precarious position. In the event
of hard exit, UK financial institutions, for instance, would be unable to enter the European
economy. It was announced at the start of year 2019 that banking and finance institutions had
already moved 1 trillion dollars in assets from UK to EU. Conservative opponents stated that
unilateral assurances undermined the UK's negotiating position, whereas proponents argued that
the EU citizens could not be treated as the bargaining chips. Economic points were also made:
while third of British expatriates in the Europe are retirees, EU immigrants are more probable to
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