Economic Policy Analysis: Brexit's Effects on UK Standards of Living

This report provides a detailed economic analysis of Brexit's impact on the UK, examining the process, agreements, and potential consequences. It explores various aspects, including trade, security, and governance, while also assessing the potential positive and negative effects on standards of living. The report delves into the economic analysis, considering factors like the cost of membership, trade dynamics, investment, sovereignty, immigration, and job markets. It further investigates the regional impacts of Brexit, particularly focusing on Ireland, London, and Scotland. The conclusion synthesizes the findings and offers an overview of the complex economic ramifications of Brexit on the United Kingdom.

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Module - Principles and Applications of Macroeconomics
Program - BA (Hons) Business and Management
Module Code - ECO 4012
Module Leader - Zainab Atta
Topic
“Economic Policy analysis, the possible positive and negative effects of BREXIT on standards
of living in the UK.”
Student Name:

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Contents
Introduction:....................................................................................................................................3
Brexit Process and Agreement:........................................................................................................3
Trade:...........................................................................................................................................4
Security:.......................................................................................................................................4
Governance:.................................................................................................................................4
Economic Analysis of Brexit on UK:..............................................................................................4
Possible Positive and Negative Effects of Brexit on UK:...............................................................5
The cost of membership:..............................................................................................................5
Trade:...........................................................................................................................................5
An economic investment:.............................................................................................................6
Sovereignty:.................................................................................................................................6
Immigration:.................................................................................................................................7
Jobs:.............................................................................................................................................7
Safeguarding:...............................................................................................................................8
How Brexit Affected Different Regions in UK:..............................................................................8
Ireland:.........................................................................................................................................8
London, United Kingdom:...........................................................................................................9
Scotland:.......................................................................................................................................9
Conclusion:..................................................................................................................................9
References......................................................................................................................................10

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Introduction:
The UK has been a member of an economic and political union since 1973 and a 'British
withdrawal' has been known as 'Brexit.' All changed after the UK voted to leave the European
Union on June 23, 2016. The voters concluded that free trade gains were insufficient to outweigh
freedom of movement costs. In comparison to the remaining 16,1 million, there are 17,4 million
supporters.
Exiting the UK from the European Union is a major change in economic ties between the United
Kingdom and the Eurozone. However, it will reopen the door to direct trade talks with non-EU
nations by close collaboration and communication with its immediate neighbours (Lee et al.,
2018)
However, an inevitable discussion with the Brexit project even among the government officials
has been triggered by the inherently predetermined economic forecasts. Any proponents of
Brexit immediately rejected early government analyses as a more partial review to undermine
Brexit. The United Kingdom has now been harmed by Brexit. The economy collapsed, with a
number of businesses moving to the EU.
Brexit's economic impact cannot be quantified, but researchers use various approaches, strategies
and data to consider how Brexit can influence economies and alert politicians of its potential
impact. In this report, we highlight the strength of the existing data and the findings that
determine the extent of the Brexit impact.
The present paper seeks to explain the observations of different economists, why they draw
different conclusions about the economic impact of Brexit on the UK economy. (Busch et al.,
2016.)
Brexit Process and Agreement:
It was a difficult job to leave the EU. On 29 March 2017, former Prime Minister of the United
Kingdom Theresa May submitted a notification of withdrawal of Article 50 to the EU. She has
concluded an EU exit deal detailing their shared ties, but a split Parliament has opposed it. Boris
Johnson, replacing Theresa May, took over as UK Prime Minister in July 2019. The Johnson
Conservative Party secured a majority after a Royal Referendum on December 12, 2019. As a
result, he could secure Parliament's approval of the Withdrawal Agreement that he negotiated
with the EU.
The Agreement Act secured the requisite parliamentary Royal Assent on January 23, 2020, which
means the Queen officially wishes to sign the bill into law.

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The United Kingdom officially joined the European Union on January 31, 2020, but there was a
modification on December 31, 2020. The EU-UK Trade and Cooperation Convention was signed
on 24 December 2020.
The Trade and Cooperation Agreement, which went into effect on January 1, 2021, has three
major pillars: trade, cooperation, and governance.
Trade:
The UK is no longer a part of the EU's customs union or single market. Instead, it has a trade
agreement that includes zero taxes and zero quotas on goods traded as long as the correct origin
rules are followed.
Security:
Despite the fact that EU regulation no longer applies to the UK, it will continue to collaborate
with the EU on law enforcement and criminal justice matters.
Governance:
To ensure that the agreement is correctly enforced and understood, the agreement formed a Joint
Partnership Council. This covers conflict resolution, civil compliance, and retribution laws, if
necessary.

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Economic Analysis of Brexit on the UK:
In concluding that Brexit would either "lift," or "decrease," economic growth, it is crucial to
consider what economists mean. To date, polls have tried to guess how much more or less Great
Britain's (i.e. GDP) economic development would be in the future, as the Great Britain will join
the EU and not leave it. These figures do not mean an expansion of four percentage points or a
decline of eight percentage points from the current level of economic activity. The figures are
instead represented in a fictional hypothetical world (Ahmad et al.,2020). According to an
unknown state estimate the United Kingdom will continue to be a member of the EU by 1.5%
per year in actual figures for the next five years however, with the UK coming out and trading
with the EU in World Trade Organization terms, that will increase by 0.4% per annum less per
year.
As a result, the economic growth of the UK in 15 years under the Brexit scenario will be 7.7%
smaller than the "residual" scenario. In the other hand, economic growth is 17% greater than it is
at present. There were no forecasts that the demand declines in 2008 and prior recession will be
forecast to year after year. In the newspapers and other commentaries, Brexit's predicted impact
on the UK economy is always discussed. Forecasts are susceptible to uncertainty, instead of or in
addition to a key forecast, and some analysts consider a variety of results. According to the
government's paper, GDP could decrease from 5% to 10% if the United Kingdom trades with the
EU under the WTO rules in the future.
Though total economic development is vital (e.g. larger markets exert greater global impact, for
many reasons), it is possible that individual voters may be more interested in how productivity
per citizen can be increased. This will influence everyday life. The supply of persons will be
influenced differently from the total performance if, as many expect, Brexit is going to result in
net migration in an economic model. (Christian Democracy and the Media)
On the other hand, slower progress may lead to unhappiness with one's living conditions. Slow
growth, for example, has led to those in their 30's earning 7 percent lower in real terms than their
counterparts ten years ago, after the financial crisis (an average GDP per person growth only by
0,3 percent from 2007 to 2017). The second generation has had poorer living conditions than past
generations, for the first time since WWII.
Possible Positive and Negative Effects of Brexit on the UK:
Culture, economics, and national identity were all discussed during the referendum vote.

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The cost of membership:
Brexit supporters claimed that exiting the EU would lead to immediate savings as the country
would not contribute more to the EU budget. In 2016, the UK spent £13.1 billion but increased
its expenditure by £4.5 billion, according to Full Fact, "so that the UK net budget was £8.5
billion." Determining whether the financial benefits of EU membership, including free trade and
domestic spending, were beyond the original costs was more complicated.
Trade:
It is possible to negotiate freely between member states within the EU since there are no tariffs or
other trade barriers. In certain respects, products, including financial services, can be sent to the
continent from any location without geographical restrictions. The uncertainty about Brexit's
effects on businesses that have made use of these rights have been a concern for some time
(Dhingra et al., 2018)
The UK will give up its economic surplus with its neighbours, which will therefore be hampered
in its trading capacity with the rest of the world. In the meantime, Brexit backers claim that the
UK will make up for these disadvantages by conducting economic agreements and believe that
those that have never been part of the EU will be okay because of it. There were a number of
competing approaches to post-EU trade policies put out by Brexit campaigners. According to
Boris Johnson, who spoke in favour of a middle ground: "I think a trade agreement will help the
future of Canada, while getting rid of tariffs," he said, and that it is "very exciting."
Nigel Farage called for closer economic links to the EU equivalent to those in Norway or
Switzerland prior to the referendum. said the Economist, "If Britain were to join the EU, it would
be subject to nearly all of EU regulation, including the working time law and everything that had
not been proposed by Brussels in the future." During that time, it has no power over such laws.
According to his latest reports, he has now changed his position on the Norwegian model and
now prefers to do away with contracts altogether, so trade tariffs will occur under the rules of the
WTO. (Graziano et al., 2021.)
An economic investment:
Anti said that if the City of London were no longer used as an EU hub for US banks, Britain will
be hurt by its position as one of the biggest financial centres in the world. They also believed that
UK financial firms would lose their rights "transfer porting," allowing them to trade in Europe
freely. If businesses with Europe, mainly banks, relocate their offices to the EU, tax collections
will decrease. The decision taken by BMW in 2016 to alert Rolls-Royce and Mini's United
Kingdom personnel to the "massive gains" made by EU membership has fuelled concerns of
carmakers limiting or even stopping UK production if cars cannot be exported tax-free to Europe
any more.

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In the other side, supporters of Brexit trusted that, particularly as the UK entered the EU, a tariff-
free trade deal would be negotiated. They proposed that Britain had a huge trade deficit with the
EU and that it was in Europe's best interests to reach a solution – for commodities and financial
services. Others contend that Britain should separate relationships with Europe and recreate itself
free of EU controls as a Singapore-style market. Any banks and financial institutions created EU
bases after the Brexit referendum to evacuate some of their staff. However, in the United
Kingdom the bulk of them appear to be continuing to operate. Few car manufacturers did worst,
but non-Brexit conditions have led to the negative prospects.
Sovereignty:
Even the most outspoken Remainers may have recognised the fact that EU membership meant
that domestic relations must give up control (Bhambra et al.,2017). The EU "was a bid to replace
the people's legislative power with a permanent administration in the interests of big business,"
says labour representative Kate Hoey, pro-Brexit. Right-wing conservatives may have disagreed
with its orientation, but both concluded that EU agencies had taken the British parliament away
from their control. The leaving of the EU would allow Britain to restore itself to a truly
independent nation with global links, according to Leave supporters.
For Remainers, the country will abandon its sovereignty in Europe, set the clock back and retire
from world power networks in the 21st century. In return to consent to comply with EU
legislation, Britain was granted a seat at the negotiating table and its position in the international
arena was enhanced, he added. they saw EU membership as a worthwhile transition of
sovereignty to control.
"That will not enhance our national autonomy by lifting this drawbridge and quitting the EU,"
labour parliamentarian Hilary Bann said.
It can only weaken it by eliminating our power to control results in a world which is constantly
complex and interdependent. The British Government will continue to tie on NATO, the UN, the
World Trade Organization and various partnerships and agreements with others. Whereas Brexit
can bring clear advantages, the Economist says, Britain might end up being a scratchy stranger
with little consumer entry, little influence and no friends. The Economist said.
Immigration:
UK did not forbid residents of other EU Member States to remain in the UK under EU
legislation, and British people had the same freedom in any other EU country to live and work.
As a result, immigration to the UK, especially from eastern and southern Europe, has increased
significantly (Corbett et al., 2016).
In 2016, as compared with 791,000 Western Europeans and 2,93 million non-EU workers,
942,000 East Europeans, Rumanians and Bulgarians were employed in the United Kingdom

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according to the Office für Nationalen Statistik. In Britain, China and India were the two main
destinations of foreign jobs.
Many Remainers acknowledged that the fast rates of migration created some problems with
housing, but the overall outcome was positive. On the other side, proponents of Brexit say
British ownership of their borders should be restored. Many citizens wanted drastic immigrant
reductions, but others indicated that the idea of national sovereignty was more important than the
figures (Wadsworth et al., 2016.)
Jobs:
Pro-EU activists emphasised the importance of economic stability, claiming that if Britain agreed
to leave the EU, three million jobs would be lost. Brexiteers, on the other hand, dubbed the
movement "Project Fear" and dismissed it as a set of terrifying fantasies. These two central
positions hid a dynamic conversation about economic projections and job rates, which
intersected with trade policy and migration debates. Take, for example, immigration. Fewer
people entering the country and eventually higher incomes for those leaving would result in less
competition for employment.
Reduced immigration, according to Remainers, may result in negative skills shortages for the
UK population as well as a reduction in goods and services demand. Limiting travel rights would
deter the "lightest and strongest" continent from visiting the United Kingdom. Following Brexit,
the UK's immigration policy will be tailored to the region's economic needs. Brexit's effect on
the labour market is still unknown. Following the referendum, economic growth slowed but jobs
remained strong, with the sort of trade partnership that the UK requires with the EU and the rest
of the world, as well as what they say in response, deciding what happens. What happens next?
According to data from the early 2000s, trade with the European Union employs almost three
million people. If the slack trade disappears and other positions are not filled, those vacancies
would be overlooked, although this is not a foreseen inference.
Safeguarding:
By staying in the EU, Britain was leaving the “door open” to terrorist attacks. However, in a
letter released during the campaign, No 10 stated that the EU was becoming an “increasingly
significant pillar of our security," especially in light of the Middle East's turmoil and the threat of
"resurgent Russian nationalism and aggression."
The United Kingdom has benefited from its membership of the EU, NATO, and the United
Nations. You share criminal histories and passenger records across the EU, and you work
together to combat terrorism (Dhingra et al., 2017). When confronted with Russian aggression or
extremism, the EU's collective weight is needed. It was "absurd" to claim that the EU would
endanger its citizens, or the people of the United Kingdom, by removing unity in the event of
Brexit. Following the Brexit vote, the government has announced that it would work to maintain
security relations with the EU (Tetlow et al., 2018).

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How Brexit Affected Different Regions in the UK:
Ireland:
The United Kingdom currently comprises Northern Ireland. The Republic of Ireland also has
borders with a member of the European Union. This agreement would not require that the two
Irish countries have a customs border. The 30-year rivalry between Catholic Irish nationalists and
pro-British protestants in Northern Ireland may have revived a customs obstacle. It ended in
1998 with the assurance that the boundaries between Northern Ireland and Ireland will not be
defined. If it had become a customs barrier, about 9300 passengers would have had to fly to and
from work and school.
London, United Kingdom:
In London, the UK's financial hub, Brexit has delayed growth. In 2018, it grew by just 1.4
percent to nearly zero in 2019. Corporate expenditure decreased by 11 per cent from Brexit
between 2016 and 2019. International companies are less likely to use London as a point of entry
into the EU market in English. Five thousand customers had been moved to the Irish subsidiary
of Barclay, while 10 percent had been transferred to Goldman Sachs, JP Morgan and Morgan
Stanley. 100 bankers have been relocated to the Dublin branch of Bank of America and 400 have
been moved to a Paris broker facility. (Sampson et al., 2016)
Scotland:
Scotland opted against leaving the EU. For Scotland and the UK, it was the best decision to
remain in the EU, according to the Scottish Government. The British Government was pressured
to promote a second vote. In order to leave the UK, Scotland will be asked to hold a referendum
of emancipation. It will then apply on its own for EU membership.
Conclusion:
Economists also argued that the Brexit results are more consistent across the range of income. If
Brexit harms the UK economy, any increase in food prices will strike poorer households harder,
while richer households will suffer less. Increases in products and services costs as well as wage
cuts will impact households. families.
This report's study of Brexit's economic ramifications seeks to forecast the degree to which the
UK economy will expand or contract in 2030, i.e. after the UK and the European Union have
adjusted to their current partnership. Depending on how the talks progress, the economic effects
will be slightly more or less negative than long-term projections indicate.
If the UK Parliament approves the agreement signed by the UK Government and the EU and
both parties work together to develop new mechanisms that draw potential trading partners, the
effect on the short-term could be much lower than predicted in future (Carreras et al., 2019.). It

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can take some time, and hence some expense, to discover any loopholes in UK and EU law.
However, if no agreement agreeable to both the UK and EU legislatures can be made, the short-
term economic impacts could be much more severe than the WTO projections of long-term
cooperation imply. The new economic developments between the United States of America and
the European Union focus mostly on these WTO scenarios. In the absence of a generalised free
trade pact, a host of side deals range from aviation to numbers, which would help businesses who
are familiar with the burdens they have to face in order to do business across the Atlantic, are
followed by them. The immediate economic upheaval could be much worse without such side
deals that would take months to negotiate.. (Figus et al., 2018.).
References
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Effects (No. w28053). National Bureau of Economic Research.
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Sociological Responses, pp.91-100.
Bloom, N., Bunn, P., Chen, S., Mizen, P., Smietanka, P. and Thwaites, G., 2019. The impact of
Brexit on UK firms (No. w26218). National Bureau of Economic Research.
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populism, nationalism, and societal division. The International Journal of Social
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Dhingra, S., Ottaviano, G., Rappoport, V., Sampson, T. and Thomas, C., 2018. UK trade and
FDI: A post‐Brexit perspective. Papers in Regional Science, 97(1), pp.9-24.

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Figus, G., Lisenkova, K., McGregor, P., Roy, G. and Swales, K., 2018. The long‐term economic
implications of Brexit for Scotland: An interregional analysis. Papers in Regional
Science, 97(1), pp.91-115.
Graziano, A.G., Handley, K. and Limao, N., 2021. Brexit uncertainty and trade
disintegration. The Economic Journal, 131(635), pp.1150-1185.
Lee, N., Morris, K. and Kemeny, T., 2018. Immobility and the Brexit vote. Cambridge Journal
of Regions, Economy and Society, 11(1), pp.143-163.
Sampson, T., Dhingra, S., Ottaviano, G. and Van Reenen, J., 2016. Economists for Brexit: A
critique. BREXIT 2016, p.81.
Tetlow, G. and Stojanovic, A., 2018. Understanding the economic impact of Brexit. Institute for
government, pp.2-76.
Wadsworth, J., Dhingra, S., Ottaviano, G. and Van Reenen, J., 2016. Brexit and the Impact of
Immigration on the UK. CEP Brexit Analysis, 5, pp.34-53.