A Comprehensive Analysis of Brexit's Impact on Finance and Trade

This report examines the impact of Brexit on the finance sector, focusing on trade and investment within the context of business management. It begins with an overview of the Commonwealth, its trade trends, and the influence of Brexit. The analysis delves into the effects of Brexit on investment decisions, regulatory changes, single market access, and the technology landscape. The report highlights challenges such as potential financial crises, capital shortfalls, and regulatory developments while also exploring opportunities. The report also evaluates the potential challenges and opportunities for the finance sector after Brexit, considering the withdrawal agreement, relocation of operations, and the overall resilience of the UK's financial sector. It discusses various areas of investment affected by Brexit and concludes with a comprehensive assessment of the economic and financial implications.

CRITICAL ISSUES IN
BUSINESS MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Impact of Brexit on investment and trade in finance sector .......................................................3
Evaluating possible challenges and opportunities in the finance sector after Brexit..................6
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Management is a process of involving planning, staffing, organising, directing and
controlling human efforts in order to accomplish the set objectives of organisation. It aids in
designing and maintaining an effective working environment in which employees can work
together. Therefore, it is essential for managers to manage all working activities and operations
so as to gain a competitive edge over others in the market. It promotes healthy among industrial
relations and extend the quality of work life. Business management contributes in the
organisational competitiveness and also, optimises use of scarce resources (Spenceley, 2012).
The present assignment is based upon British Commonwealth. It is an inter government
organisation of 52 member states which are mostly former territories of the British Empire. In
this modern era, there are various key trends that come in trade of goods and services. It is
operated by inter government consensus and commonwealth games are organised through non-
governmental organisations as well as commonwealth secretariat. It was formed by London
Declaration in the year 1949 so as to carry out games at global level. Readers will also come to
know the impact of Brexit on trade and investment in finance sector. Furthermore, managers
have to evaluate the possible challenges and opportunities of a business enterprise.
Apart from this, there are several countries which are also involved in commonwealth
games such as Australia, Belize, Fiji, Ghana, India, Kenya, Mauritius, South Africa, Tonga,
Swaziland, Zimbabwe, Nigeria, etc. All these nations organise various games and they also trade
in goods and services. Along with this, there are several non-government organisations which are
involved in trading of goods and services of sports (Lin, 2013).
Key trends in trade of goods and services between Commonwealth countries: -
As per the time changes, United Kingdom is involved in commonwealth games and
activities. Below mentioned several changes which are done by business organisations so as to
make various improvements in commonwealth games such are stated as under: -
 Central to Liverpool’s unique bid to stage the Games is the riverside just two miles north
of the city centre.
 A new football stadium should be replicated the intimacy, fan proximity and atmosphere
of Goodison Park – will accommodate a temporary athletics track for the Games without
any disruption to those features. The track will be installed after the final home game of
1

the 2021/22 season and will be removed before the first scheduled kick-off of the
2022/23 season.
 A new 50 metre swimming pool is prepared in London, that would remain in place after
the Games – providing both a swimming and visitor attraction legacy
 Track Cycling and T20 Cricket are optional sports that would take place in Manchester
at Old Trafford Cricket Ground (Emirates Old Traffor).
Key trends of goods and services in commonwealth countries, such as-
Tea products – India is one of the famous commonwealth country that is a largest seller
tea and coffee products. The country is the finest over the world owing to strong geographical
indications, by having heavy investments within different units of tea processing (Busch and
Matthes, 2016). India is highly focused on continuous innovations augmented product mix as
well as strategic market expansion. Along with this, the major tea growing regions are – North
East India and North Bengal. Export of Indian teas including by 5.7% in the first four month of
2017. During 2016, major importers of Indian tea was Russia, Egypt, Iran, Saudi Arabia etc.
Precious gems and metals – Another products are precious gems and jewellery. United
Kingdom is the second largest retailer of these goods and services, i.e. gems, jewellery,
diamonds are accounted for $22 for UK exports in 2016. Apart from this, China is also a great
seller of jewellery products and services. In 2015, China has dropped by 3-20% in retailing sales
of platinum jewellery. Demand of diamonds is currently valued at around RMB62 billion in a
year. The country basically trade its gems and stones to UK and earn profits from here.
Moreover, at present only 20% of Chinese urbanities own diamond jewellery whereas 70% of
the population of the UK own such items.
Food industry – Australia is known as developing country and it has a huge market share
in food industry. The country's food and agriculture sector involves food related agriculture
production, food processing and the major inputs to these activities. Food industry market of
Australia is classified into two parts, such as- food products, like all types of food processing and
beverage manufacturing and the key inputs to the sub sector (Heisbourg, 2016). Another is
agribusiness involves all agricultural which relates directly to food production. Furthermore, the
food industry of Australia highly contributes in its economic growth and development by
providing employment and service opportunities. There were approximately 1800000 businesses
2

trading in the same sector in year 2015. Australia directly supplies its products to UK at the time
of commonwealth games and this improves inter personal relations of both countries.
Iron, ore and concentrates – These commonwealth countries also have a huge market
share in Iron and Ore market. London shares in BHP Billiton and Rio Tinto, these are the two
largest producers of iron ore. Along with this, in steel mills opting to buy cheaper iron which is
stockpiled in ports rather than the higher grade.
Impact of Brexit on investment and trade in finance sector
In June 23, 2016 UK government was decided to referendum to leave the European
Union; it means British Exit. Leave won by 51.9% to 48.1%; the referendum was turned out by
71.8% by more than 30 million voting. Along with this, individuals now talk about soft and hard
Brexit in order to know that how close the UK will be with EU post separation. Before
understanding the impact of Brexit, readers have to know that what European Union is. European
Union is a political and economic partnership, there are over 28 member states involving in UK.
It started after Second World War and grow since from there in a single market. It allows goods
and people to move around (Ramiah, Pham and Moosa, 2017). European Unions has their own
central bank, parliament as well as the euro currency that is used by 19 countries by having some
members which are opted by Britain to keep its own money. Moreover, Eurocrats can pushing
always political and financial union. Apart from this, Brexit also put a huge impact on UK's
businesses isn positive and negative manner. There are several business of in Europe are ram
down and many of them had to come in UK. It can be affected their all overall sales and
productivity. Although, Brexit was allowed Europe business owners to pay high tax rates so as to
perform in United Kingdom freely.
Although, Brexit has put huge impact on economic areas of debate while the referendum
on United Kingdom membership on EU. This debates was continued until the leave vote. EU has
put strong positive impact on commercialisation; it results British trade market would goes
down. According to different surveys, it is also analysed that Brexit also reduce the per capita
income level of people. Therefore, it affect the economic condition of the country and also create
several obstacles to trade, immigration and foreign direct investments. Through which, foreign
investors are not ready to invest in UK's market. On the other hand, Brexit has affected the
investment decisions of financial sectors and other corporate associations whether to invest in
3

UK market or not. This impact can be seen negatively to the overall growth and development of
UK's economy.
Along with this, the influence of Brexit on financial and investment sector in UK is
depend on three things, such as-
 Adequacy of the withdrawal agreement between the UK and the EU
 The extent to which UK-based financial firms move operations before any agreement
(adequate or not) is concluded
 The overall resilience of the UK financial sector to Brexit, through its broader global
relationships and position.
Apart from this, finance sector is one of the significant sector of UK's economy, the
continuous growth and success of the country is depend upon financial services.
United Kingdom also invest in several sectors which are getting affected by Brexit. It is essential
for legal authorities to determine this influence and find out proper solutions for the same
(Jensen and Snaith, 2016). There is describe several areas in which British government has
invested. However, UK is a modern service-oriented economy, here business investment is very
4
Illustration 1: UK-EU financial services
(Source: Brewing Brexit's impact on U.K. financial services, 2016)

different from the “dark satanic mills” of the industrial revolution. Investment spending makes
up about 17 per cent of UK national income and business investment is more than half of this —
the rest is residential property and government investment. Business investment can be roughly
split into four parts: residential property, commercial property, intellectual property — which
includes software, and transport and machinery.
Regular impact - The regulatory image of Brexit is complex. UK government has set
several financial and banking rules. Whereas in some areas it is argued that UK's principles and
standards of are higher than EU. Thus, it is suggested that the impact should be limited. Brexit
can reduce financial crises and economic dimensions through getting divergent responses from
UK and EU regulators.
Single marker access – At the time of Brexit, UK has losses to its single market, many
banks which are currently operated over the EU by having single London Branch will have to
establish fully functional branch elsewhere in the EU. Firms could incur $50000 per employee
on an average for relocation. Along with this, many banks also faces several financial issues. But
the major benefit of Brexit is, it reduces interest and bank rates as well so that individuals can
easily take loan from any financial institute (Matti and Zhou, 2017). Due to the loss of pass-
porting rights, financial companies – the biggest employers in UK with a 2.2 million strong
workforce. In which many are belongs from European Union- so as to relocate a large number
of employees.
Regulations – Another vital point which leads up to Brexit is to free UK from all the
shackles of European Union laws and regulations which can hamper business. The existing
government has planned to absorb laws and regulations so that all business organisations can
easily perform in other countries. In addition, due to implementation of Brexit, it is necessary for
all financial sectors to follow all laws and legislations in order to gain high competitive edge.
Technology landscape – Impact of financial services on Brexit also affected
technological advancements. It results companies get production tools and techniques in cost
effective manner (Sinclair, Stagnell and Shah, 2016). Along with this, technology landscape also
affected by Brexit.
Below mentioned other areas which are affected by Brexit, such as-
Fair value loss leading to capital shortfall - An enhancement in earning a credit rating
down grade on European Union sovereign debt. Along with this, Brexit also reduce the market
5

value of sovereign debt that could be measured on fair value balance sheets on banks. However,
in several cases, there would be a hit on capital.
Regulatory developments on treatment of sovereign debt – Another major impact of
Brexit on capital requirements that is expected from potential regulatory evolution within sphere
of dominating debt exposures. EU can consider two measures on sovereign debt exposure, such
as apply positive risk weights and set exposure limits. It is essential for legal authorities to
implement these measures, a credit rating down grade must be followed by Brexit (Whitman,
2016). It results higher weightage to capital requirements.
Possible challenges and opportunities in the finance sector after Brexit
In United Kingdom, when Brexit was regulated over here several challenges and issues
were faced by the economy in several aspects. On the other hand, Brexit also provided attractive
opportunities to the country in terms of improving gross domestic product rates. At this time, the
country was not able provide job opportunities to people; it results disposable income of people
goes down (Emmerson and et. al., 2016). Although, Brexit have opportunities as well as
challenges for United Kingdom, and its bilateral relationship with other countries. While Britain
is unable to negotiate free trade deals with other nations until its exit from the EU is concluded in
March 2017. The terms under which Britain will emerge from the EU have become clearer in
recent months, most recently as the government unveiled details of legislation on how it would
incorporate existing EU legislation into British legislation to leave the country in the position to
be able to conclude a free trade agreement with the EU and beyond. Britain has made clear its
eagerness to forge international trade accords and is hopeful that it would be able to establish a
free trade agreement with different countries, succeeding where the EU failed despite years of
negotiations.
Below mentioned are several challenges that are being faced by the UK due to Brexit:
Brexit was known as to be very serious damage for UK's economic growth and
development. Although it was fully depend crucially on what damage limitation the coming
years of political renegotiations will bring. Now in this global competitive environment, there is
so much uncertainty in financial and investment markets. Loss of EU funding, economic
hardship and recruitment restrictions is a great challenge for government authorities.
Furthermore, there are several long term changes which also affect EU legislations and health or
society. The results of referendum result also starkly revealed aspects of society. British cities
6

have negatively affected by Brexit; it resulted in enhancement of trading costs of UK and EU.
Economic output in cities can be predicted at 1.2% lower on an average under the ‘soft Brexit’
whereas 2.3% lower under a ‘hard Brexit’ than if the UK remained in the EU.
British cities have large share of employment in private sector, but Brexit affected the
countries in an adverse manner by raising trade costs and other duties. Cities are predicted to be
higher adversely affected are tend to be more productive and having skilled workforce it means
they may easily adapt long term growth and success (Downes, 2017). In 2015, Bank of England
has released regarding immigration of wages; it involves that the balance of the research on this
issue suggests that the share of immigrants in the workforce has had little or no impact on the
pay rates of the indigenous population. It is essential for EU legal authorities to update business
leaders on industry challenges and regulatory requirements so as to running modern as well as
efficient global trade programmes.
Apart from this, Brexit also provides future opportunities to the country, i.e. United
Kingdom in terms of improving its GDP rate and per capita income. Due to Brexit, there was
huge businesses organisations are established; it results people would get job opportunities; it
improves their disposable income (Green and et. al., 2016). Although, if British population spend
higher amount on consuming goods and services then it would boost up their living standards.
It is worth viewing the impact of Brexit in the context of the overall size of the UK
economy. Our analysis suggests that the UK will remain a relatively large, affluent and growing
economy in two hypothetical exit scenarios, just not quite as large or affluent as in the
counterfactual situation if the UK were to remain in the EU.
Issues Implications
Trade and supply chain The EU is the UK's exporter partner, accounting for around 45% of
UK’s total exports. Leaving European Union is likely to make trade
with EU more difficult and expensive.
Tax and fiscal UK would no longer be needed to make a financial contribution to the
EU which could lead to increase public spending or lower tax duties.
Regulations UK is subject to EU regulation. Brexit may mean UK businesses would
have to adopt to a different set of regulations that might be costly.
Foreign direct FDI from the EU made up around 46% of the total stock of FDI in UK,
7

investments 2013. Brexit could put this inbound investment at risk.
Labour market and
uncertainty
UK may have to change its migration rules and policies. Presently, EU
citizens can live and work in UK without any restrictions; business will
need to adjust (Mercik and Ramsey, 2017). Apart from this, risks or
uncertainties could raise in running up to the referendum and during
exit negotiations. If UK decides to leave with wide reaching
implications for businesses.
In order to overcome all challenges which occurred post Brexit, UK does not have to
continuously allow unlimited EU immigration. Government bodies have to withdraw from the
European court of judgement. The major benefit of Brexit to UK is, it could again prohibit the
free flow of people, it results, people will easily influence to vote for Brexit. Overall concern is
about increase in the number of refugees in Middle East. On the other hand, its main
disadvantage is slow growth of Brexit. As per the data and surveys, it is analysed that economic
growth will be slow, i.e., 2.4 percent in 2018, 1.9 percent in 2019 and 1.6 percent in 2020.
Therefore, Brexit is disastrous for the UK's financial sector. It is no longer beneficial for business
entities operating in the Europe.
CONCLUSION
From the above report, it has been summarised that business management plays a crucial
role in growth and success of any business organisation. It is essential for the managers to
manage all their working operations and activities in order to achieve firm's goals and objectives.
Apart from this, in this modern era, there are several key trends occurred in commonwealth
countries. These nations are famous for several products and services like jewellery, precious
gems and stones, clothing, food industry, etc. Brexit also put a huge impact on the financial
services and investment decisions of country. Therefore, it is necessary for government bodies to
determine impact and make a proper conclusion for the same. These are the several issues that
can be occurred due to Brexit such as trade and supply chain, tax and fiscal regulations, foreign
direct investment, etc.
8

REFERENCES
Books and Journals
Busch, B. and Matthes, J., 2016. Brexit-the economic impact: A meta-analysis (No. 10/2016).
IW-Report.
Downes, C., 2017. The post-Brexit management of EU agricultural tariff rate quotas. Journal of
World Trade. 51(4). pp.741-762.
Emmerson, C. and et. al., 2016. Brexit and the UK's Public Finances (No. R116). IFS Reports,
Institute for Fiscal Studies.
Green, S. and et. al., 2016. Brexit Referendum: first reactions from anthropology. Social
Anthropology. 24(4). pp.478-502.
Heisbourg, F., 2016. Brexit and European security. Survival. 58(3). pp.13-22.
Jensen, M. D. and Snaith, H., 2016. When politics prevails: the political economy of a
Brexit. Journal of European Public Policy. 23(9). pp.1302-1310.
Lin, R. J., 2013. Using fuzzy DEMATEL to evaluate the green supply chain management
practices. Journal of Cleaner Production. 40. pp.32-39.
Matti, J. and Zhou, Y., 2017. The political economy of Brexit: explaining the vote. Applied
Economics Letters. 24(16). pp.1131-1134.
Mercik, J. and Ramsey, D. M., 2017. The effect of Brexit on the balance of power in the
European Union Council: An approach based on pre-coalitions. In Transactions on
Computational Collective Intelligence XXVII. (pp. 87-107). Springer, Cham.
Ramiah, V., Pham, H. N. and Moosa, I., 2017. The sectoral effects of Brexit on the British
economy: early evidence from the reaction of the stock market. Applied Economics.
49(26). pp.2508-2514.
Sinclair, E., Stagnell, S. and Shah, S., 2016. Brexit and dentistry. British dental journal. 220(10).
pp.509-512.
Spenceley, A. ed., 2012. Responsible tourism: Critical issues for conservation and development.
Routledge.
Whitman, R. G., 2016. Brexit or Bremain: what future for the UK's European diplomatic
strategy?. International Affairs. 92(3). pp.509-529.
Online
Brewing Brexit's impact on U.K. financial services. 2016. [Online]. Available through:
<https://www.bloomberg.com/professional/blog/brewing-brexits-impact-on-u-k-
financial-services/>.
1