The fundamentals of economics

THE FUNDAMENTALS OF
ECONOMICS
1

TABLE OF CONTENT
INTRODUCTION..........................................................................................................................4
ESSAY............................................................................................................................................4
Impact of Brexit on retail industry of United Kingdom and Government intervene to address
market inefficiencies for better outcome....................................................................................4
CONCLUSION...............................................................................................................................8
REFERENCES................................................................................................................................9
2

INTRODUCTION
Economic is branch of social science that studies related to the way people interact with
each other’s, especially in terms of production, distribution and consumptions of good and
services. Retail sector of United Kingdom is one of the growing industry that consist of 5% of
gross value added in UK economy. TESCO, SAINSBURY, WALMART and MORRISON are
four biggest retailers operating in UK to earn high profit margin and revenue. Brexit is one of
the policy that has negatively impacted on growth and expansion of firm as most of the sales of
UK is with European Union. Thus with exist of UK from EU membership has resulted in
decrease in sales and growth of economy. This report has covered crucial information related to
impact of Brexit on retail industry of UK. Along with it, has include detailed pertaining to
whether the government needs to intervene in order to address the market inefficiencies and
what are possible government policies and their impact on economy.
ESSAY
Impact of Brexit on retail industry of United Kingdom and Government intervene to address
market inefficiencies for better outcome
Brexit is one of the policies that has been made by the government which has resulted in
withdrawal of United Kingdom from European Union. Before the brexit, UK was able to sell its
products and services to EU without paying the taxes so there was not much limited pertaining
to the trade. As the name suggested Brexit is “British exit” from EU, it has been initially started
when UK has vote to leave EU on June 23, 2016. In addition to this, retail industry has
contributed in generating total value of £358 billion sales in 2016 and lead in employing more
than 3 million people in UK. At the same time, it has also been identified that 1/3 of proportion
of consumer spending is through retail industry (Shtompel, 2018). Moreover, around 60% of
import of raw material or product are imported to UK from European Union. So, it can be stated
that the Brexit has negative impact on overall retail industry of UK which can be explained in
detailed as follows:
Firstly, most of the retailers make purchase of their products and services from EU but with
implementation of brexit, UK has to make more payment in order to import goods into country
for satisfaction of customer requirement. Thus, it has result in increasing overall cost of
products, lower profit margin and decrease in sales volume and profitability. Moreover, the UK
3