The Economic Impact of Brexit on the UK: A Business Economics Report

This report delves into the economic implications of Brexit on the United Kingdom, examining various facets of its impact. It begins with an introduction to business economics, setting the stage for an analysis of Brexit's effect on the UK economy. The main body of the report explores the economic consequences, including potential trade barriers, reduced market integration, and the effect on GDP, consumer standards, and the service sector. It also assesses the role of the UK government in navigating Brexit, including its responsibility to activate Article 50, renegotiate trade agreements, and manage fiscal plans. Furthermore, the report applies Keynesian theory to analyze the Brexit problem, suggesting the need for government investments to stimulate demand and maintain employment levels. The conclusion summarizes the key findings, highlighting the multifaceted economic repercussions of Brexit and the importance of strategic government actions. The report also includes references to support its analysis.

Business Economics.
1

Table of Contents
Business Economics........................................................................................................................1
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Economic effect of Brexit on UK ...............................................................................................3
The role of government in Brexit ...............................................................................................4
Keynesian's theory to analyse Brexit problem. ..........................................................................5
CONCLUSION ..............................................................................................................................6
REFERENCES................................................................................................................................7
2

INTRODUCTION
Business economics is the field of economics which uses quantitative methods to
analyses the data of the enterprises. Business economics deals with practical aspect of business
which helps the company to take better and effective decisions. Business economics is basically
the integration of economic theory and business practices. It studies various economic factors
which are external but have an impact on the business. It is a tool for decision-making and
planning and also helps in framing various policies. This helps to forecast the demand and
allocate resources and it also helps in inventory management. In the report economic impact of
Brexit on UK will be discussed.
MAIN BODY
Economic effect of Brexit on UK
Brexit the term refer to the contraction of British exit , it is the most certain possibility of
Britain withdraw from the European union. After analysing data and info it shows that post
Brexit UK will be in bad economic condition outside the Europe. The exit from EU could result
in lower trade between the UK and EU due to higher traffic and non traffic barriers of trade . The
benefits will be less in future for UK as the market integration will fall down from EU . There
will be an economic benefit in leaving EU which will decrease in net contribution of the EU
budget. There will be downfall in the trade and fall in average UK income. Also, low trade will
affects consumers , worker , firms which in result in bringing down the living standards , life
style and GDP of UK. Brexit with not sign any deal and by only applying world trade
organization (WTO) rules will lead to the biggest economic loss for the UK. Working in future
with WTO rule will result in a downfall in GDP of around 5% in the coming 10 years post
Brexit. WTO result will move UK away from EU standards which includes of significantly
increased in non traffic standards affecting the ability of business to sell product and service to
EU countries from UK. Service sectors like financial services dominates the economy of UK
around by 80% of its GDP. After applying the WTO rules EU will also face some economic loss
but not high as compared to UK because the economic loss of EU in coming ten years after
Brexit would be around 0.7 % of its overall GDP . There will also be huge impact on technology
and innovation sector as there will be different rules and regulation towards the change. The
accessibility criteria may differ from place to place from UK to EU . In the future scenario the
3

international roaming charges from UK to EU may vary which the UK government will not be
able to negotiate and has to follow a proper partnership agreement.
Scenarios of other trades would be considerably better for UK than WTO rules , but most
of them will lead to economic loss in compared with the current situation as an EU member.
Also, post Brexit the most important effects will be political and security to the US . For UK it
will become important to seek out ways from zero sum game to a positive sum game as the
negotiation take place to make best deal for all parties. All the estimates are considerable
uncertainty for two reasons, first there is essential uncertainty related with forecasting the effect
of economic policy choices. Second, there is political uncertainty to what the future policy
choices will be on both the UK and EU. The impact of Brexit on public finance will be
depending up on the final outcome of the future trade negotiation between UK and EU
The role of government in Brexit
Government of UK has a very important role to play in Brexit as they have existed from
the European Union so the government of UK has to activate Article 50 and as per this article
any member state can withdraw from being the member of the European Union if there is any
provision in their constitutional requirements. The objective of the UK government to exit from
European Union was to regain the control, and they believe that decisions related to UK should
be taken in UK only (Renwick, 2017).
The government of UK also needs to re-create the capacity to re-negotiate their trade agreement
as the government has not done any dealing directly from past many years.
Then government needs to revisit their fiscal plans and decide the amount of funds and resources
are required to compensate for the public finances (Oppermann, Beasley. and Kaarbo, 2020).
The government of UK has to pay bills in the currency of Euro. The economic growth has been
impacted by Brexit as there is uncertainty of the surroundings and the currency of UK feel from
certain pounds.
UK's government has to pay tariff for importing any goods in the country and which will
increase the inflation rate (McGowan, 2017).
The government of UK will also not get the advantage of state-of-the-art technologies that EU
grants to its members and there will be rise in unemployment level in the economy.
4

The government of UK is strongly supporting the Brexit, but they have also showed a concern
about the relationship with other economies such as US with whom they have great trade
(Carmona, Cîrlig. and Sgueo, 2017). Around more than a half of the UK voters supported to
leave European Union. The government of UK and EU ensures that UK does not violate the laws
and rules of EU.
The government of UK is also making efforts to negotiate on the future relationship and
expecting a free trade agreement with the European Union in the areas related to financial
service regulations, state aids, transportation, environmental and labour standards (Gordon,
2016).
Due to Brexit the economy has to face higher inflation rates therefore the role of government is
to reduce the inflation rate in UK. The government can control the inflation rates through
monetary policy, fiscal policy and the exchange rates. UK's government can do it by changing
the tax rates, changing the spending levels and the level of aggregate demand (Ries. and et.al.,
2017). The government cam also use wages and price controls to fight the inflation. The
government can also increase the interest rates leading to lower economic growth which
ultimately leads to lower inflation rates. Controlling the money supply in the economy by the
government of UK can lower the inflation rates.
Keynesian's theory to analyse Brexit problem.
Keynesian theory suggest that to boost the economy government must stimulate the
demand of the customers. For this huge amount of investment should be made in infrastructure
and also efforts should be made to increase the employment level in the economy (Sebastiani.
ed., 2016). The demand in the UK economy can be driven by doing huge investments in various
fields. And to maintain employment in the economy the government should increase their
spendings. In case of Brexit, the government of UK will face a high unemployment in the
economy after taking the exit from European Union. Therefore, as per this theory the
government of UK should increase their spendings to maintain the level of employment. The
government of UK should invest into infrastructure to increase the demand of the customers as
according to this theory the demand of customers increases when the government spends on
infrastructure and development. As per this theory equilibrium comes at the point where the
aggregate demand curve intersect aggregate supply curve. So the equilibrium of UK will be
5

determined at the point at which the demand of UK economy will be equal to supply of UK
economy (McCombie. and Spreafico, 2018). The theory of classical economics focuses on
making choices under the situations of scarcity whereas This theory of Keynesian studies the
economy under the situation of uncertainty and in the case of Brexit the economy is in the state
of uncertainty and this theory applies best.
CONCLUSION
It can be concluded that the economic impact of Brexit on UK were . Also the
government of UK also plays an important role in Brexit such as government of UK has to
activate Article 50, needs to re-create the capacity to re-negotiate their trade agreement, also the
UK government needs to revisit their fiscal plans, they have to pay bills in the currency of Euro,
also the government has to pay tariff for importing any goods in the country. Keynesian theory
was applied to analyse the Brexit problem in UK.
6

REFERENCES
Books and journals
Carmona, J., Cîrlig, C.C. and Sgueo, G., 2017. UK withdrawal from the European Union: legal
and procedural issues. European Parliamentary Research Service, March.
Gordon, M., 2016. Brexit: a challenge for the UK constitution, of the UK
constitution?. European constitutional law review, 12(3), pp.409-444.
McCombie, J.S. and Spreafico, M.R., 2018. Brexit and its possible implications for the UK
economy and its regions: A post‐Keynesian perspective. Papers in Regional
Science, 97(1), pp.133-149.
McGowan, L., 2017. Preparing for Brexit: Actors, negotiations and consequences. Springer.
Oppermann, K., Beasley, R. and Kaarbo, J., 2020. British foreign policy after Brexit: Losing
Europe and finding a role. International Relations, 34(2), pp.133-156.
Renwick, A., 2017. The process of Brexit: what comes next. London: UCL European Institute:
Working paper.
Ries, C.P. and et.al., 2017. After Brexit: Alternate forms of Brexit and their implications for the
United Kingdom, the European Union and the United States. RAND Corporation Santa
Monica United States.
Sebastiani, M. ed., 2016. The Notion of Equilibrium in the Keynesian Theory. Springer.
7