Impact of Brexit on Business Management: A Critical Issues Report

This report delves into critical issues in business management, exploring key trends in trade between Commonwealth countries, particularly the UK's relationship with these nations and the impact of globalization and urbanization on trade patterns. The report then analyzes the significant impact of Brexit on the finance sector in the UK, discussing disintegration, uncertainty, and the implications for investment banking and foreign currencies. It examines how Brexit has affected multinational enterprises and their growth, while also considering the flow of investment and remittances within the Commonwealth. The report concludes by summarizing the effect of Brexit on trade and investment within the UK's finance sector, emphasizing the importance of global trade and the need for collaboration among Commonwealth nations to achieve sustainable development goals. It highlights the challenges and opportunities arising from Brexit and the ongoing reforms within the Commonwealth to support business development.

Critical Issues in Business Management

TABLE OF CONTENTS
INTRODUCTION 1
Q1 Explaining the key trends in trade of goods and services between Commonwealth
countries......................................................................................................................................2
Q2 Analysing the impact of Brexit on trade and investment within the finance sector of UK...6
Q3 Evaluating possible challenges and opportunities of multinational enterprise in finance
sector on post Brexit....................................................................................................................7
CONCLUSION 8
REFERENCES 10

INTRODUCTION
Trading of goods, services and manpower are not new to the world as the history of
trading is as old as the humans exist in the world. In simple terms trading is the exchange of
goods and service between two countries in return of money. In the present report all the
critical issues regarding the business management and trading are to be included. It will also
include Commonwealth countries of the world and the mode of trading between them.
Commonwealth countries is a group of nations of inter-governmental organisations of 53
members states that are mostly former territories of British Empire. All the Commonwealth
countries are generally forming a voluntary association of 53 sovereign states. The report will
also cover Brexit Britain's decision to withdraw its name from the European Union in a
referendum 23th June 2016 with about 51.9% vote. This decision of Britain to leave EU has
greatly impacted trade and investment within finance sector in UK. The report will further
cover the effect of Brexit on the multinational enterprise of UK and how their growth are
stagnated or evolved after Brexit. At the end the report will conclude with the impact of
Brexit on trade and investment within the finance sector of UK.

Illustration 1: Commonwealth Trade review 2015
[Source: Commonwealth Trade review. 2015]
Q1 Explaining the key trends in trade of goods and services between Commonwealth
countries.
Initially the word globalization was only confirmed to developed or powerful
countries of world but now the door of technology is also opened for small and developing
countries of the world as well. There are number of small enterprise in these small countries
of Commonwealth nations like that of Jamaica and Kenya which are giving opportunities to
them. Then they in future develop to more large scale industries by adopting the way of
digital marketing or e-commerce website like that of eBay. The individual in these small
nations are using digital platform in learning, finding work and then they show their talent by
building personal network.

But many African countries are not having access to either digital technology or
internet the benefit of technology on Africa is still to be seen. Even there are no access to
electricity and they are living without the use of electricity. But this technology will surely
can transform the way people are living and growing in Africa but if it is dominating the
country. Urbanisation is also impacting the trade trends of Commonwealth nations as this is
engaging them in better improvement in the trade and commerce. The people of the
Commonwealth nations are engaging in use of technology and digitization which is
increasing the profit maximisation by the help of technology.
UK is having very different type of relationship with all the other 52 voluntary nations
of Commonwealth group. As most of the Commonwealth nations are colonies of British
Empire prior to their independence. The exchange of goods and services of UK and
Commonwealth nations are nearly just double from just £13 billion to £25 billion from 1999
to 2010. UK will be leaving the European Union in the mid of 2019 and this will be affecting
trade and commerce of UK with the other EU countries as well. The Commonwealth is
making a small part of trade of UK and around 9% of the total export of UK in 2015. There
are some major trading partners of UK in Commonwealth nations Like Australia, India and
Canada are the largest economies of world. From Australia UK is trading about £8.6 billion
of goods in 2015 and service of about £1 billion in the same year. However, India remain the
leading trading partner of UK and value of importeed goods from India become £4.4 billion
in 2005 and £9.5 in 2015.
Commonwealth countries are the group of 53 voluntary nations of the world and most
of them being the former territories of British colonies (Iliffe, 2016). They all operate by inter
governmental consensus of the members states which is organised by Commonwealth
Secretariat and non-governmental organisations regulated by the Commonwealth Foundation.
It was formed in the mid of 20th century with the decolonisation of British Empire after
London Declaration 1949. There are almost 53 countries of the world who are the part of
Commonwealth countries in the year 2017 which are:

Illustration 2: Commonwealth Nations 2017
[Source: Commonwealth Nations. 2017 ]
All the countries which form a part of Commonwealth nations are following the
policy of free trade they are all trading among themselves but there is no multilateral trade
agreement between them. But all the Commonwealth member are trading 50% more than
with a non member nation on an average (Grey, 2016). The free trade is the agreement which
is the proposal of removing of trade barriers between all members state of Commonwealth
nations. But this free trade is only possible between some countries only like that of India and
Canada some Caribbean and African countries are also part and Australia as well.
Commonwealth was initially a non trading bloc but now the exchange of goods and services
are strongly increasing between them and which is estimated to rise to $1 trillion by 2020.
Intra Commonwealth trade:
The intra Commonwealth trade is growing at very fast trend and in the year 2013 the
total value of good and service traded was about $592 billion (Trends In Trade Of Goods And
Services Between Commonwealth Countries, 2017). This in the year 2015 was grown to
$687 billion with a volume of increase of 10% every year from 1995. The rising trend of
trade between these countries are very significant and impressive as all the member countries
are taking active part in this regional trading arrangement (RTA). From this trade 76% of
trading is of goods among the countries which is $450 billion and the expansion of trade of

service is yet to be increased. The contribution of these member countries is also remarkable
in the global level of trade which is increasing since 1995 (Intra Commonwealth trade, 2013).
This intra Commonwealth trade in the year 2015 was about $535 billion and this is
prominently dominated by Asian and African countries. Asian countries contribution is
accounted for $249 billion which is 55% in the year 2015 Singapore (22%), Malaysia (16%)
and India (14%) are the largest exporter. Asia is holding the dominant position in the intra
Commonwealth trade in both import (46%) and export. The major trade of the
Commonwealth nation is done by developing countries which are of Asian continent.
Intra Commonwealth service exports are valued at $139 billion in the year 2013 and
rise by $162 billion in 2015 as this is basically powered by 5 countries of the group which is
over 80%. These countries are UK (32%), Singapore (17%), India (12%), Australia (11%)
and Canada (9%). UK is not doing well in the trading of goods but in the trading of service it
the most dominant country by having 32% while India and Singapore are major exporters of
services among Commonwealth countries (Singh, Pavlakis and Segelov, 2016). From the year
2000-09 the significance of trading of goods and service was very good and was
accompanied by a decrease share of developed countries from 72% to 61%.
Illustration 3: Intra Commonwealth
trade 2013
[Source: Intra Commonwealth trade. 2013]
Investment and remittance flow of Commonwealth Nations:

The intra Commonwealth foreign investment is also increasing remarkably over the
last decade which reached to highest in the year 2007 of $80 billion before the crisis of 2008.
From the total of FDI inflow of Commonwealth nations the intra Commonwealth FDI flow is
about a quarter more. But the major stock of the FDI is from the developed nations of group
like that of Australia, Canada, Singapore and UK which is over 65% (Trends in Trade of
Goods and Services between Commonwealth Countries, 2017). FDI stock of countries like
India and South Africa are notably more diverse with significant share held by the developing
nations. And this FDI of these two countries are going to be invested in Mauritius and
Nigeria. The remittance flow of these Commonwealth nations are also one of the element of
trade and investment as the transfer of personal money is becoming main source of external
financing. The remittance of Commonwealth nations reached to $436 billion in 2014 which is
majorly in developing countries. According to World Bank data intra Commonwealth
remittance is about $45 billion in 2014 and this is the 30% of total remittance.
In the Commonwealth trade Ministers Round table held on 10th March 2017 they
evaluated that there have been a slowdown of global trade and rise of protectionism. Under
this conference which was held they talked about the importance of global economy and this
will be beneficial for 2.4 billion Commonwealth citizens (Intra Commonwealth trade. 2013).
To achieve the sustainable development goal all the developing countries need to grow use of
global trading environment. This must be done to strengthened the collaboration, deepen the
relationship and also to support for multilateral trading system. There are many internal
reforms in the Commonwealth nations which are taking place and this account to most of
investment. Ministers analysed that they need to focus on certain things which intern help top
develop all the countries.
 Diversifying market;
 Developing value chain;
 Research and development;
 Support for SME, access to finance and infrastructure development;
 Non-tariff measures;
 Green economy; and
 Cross cutting progressive business agenda.

In the Commonwealth countries there are mainly dominance of developing countries
and their share in GDP is raised from 20% to 40% over the past decades. The trade profile op
the developing Commonwealth nations are also increasing as their total export in 2013 was
around 46% (Grey, 2016). The global value chain which is in one country will also be
affected to entire production. This is leading to promotion of private sector development in
the Commonwealth nations but still there are many difficulties like the access of finance,
inadequate and inefficient infrastructure and political instability in many of the countries.
The Brexit and Commonwealth secretariat work on international trade include the
policy and global advocacy include the multilateral and regional trade and negotiation, trade
challenges of small states. The long term capacity building support to African, Caribbean and
Pacific countries through the Hubs and Spokes project. Brexit will be affecting the
Commonwealth developing countries in various ways which will include through a weaker
pound the potential economic performance of UK and Europe possible trade.
Q2 Analysing the impact of Brexit on trade and investment within the finance sector of UK.
There is very larger impact on finance sector of UK after Brexit which will be like:
Disintegration- there are greater efficiency in the public of Europe which will be integrating
the financial market for good job and growth across the continent in both past and present. In
this integrated market French farmers, German car manufacture and fashion designers of Italy
will be securing their funds more easily.
Uncertainty- there are many uncertain deals between UK and EU which will be known for
the people and the single market are been there for Euro foreign currencies trading,
investment banking and insurance as well.
Investment banking- this will be depended upon the individual strategic investment of the
firm of both UK and EU. Brexit will be changing the UK base international banks which will
be becoming the rule taker and if they wan to remain the same they do not need to change the
regulatory framework.
Foreign currencies- the future of euro trading in the single market of UK is very much
uncertain.
Asset management- UK will be losing its share in Ucits business which will be of €1 trillion
more than that in year 2015 to that of all the countries of EU.

All the financial sector including corporate and investment banking is been effected
by this Brexit as UK will now not be involved in investment of its capital and find in EU.
Many of the financial and banking rules of EU which were regulating the UK and its
economy will now not be impacting it any more. UK will be forming their own set of rules
and regulation which will be higher than theta of EU. And this will also be affecting the jobs
in this sector as about 2 million of employees are employed in London in the banking and
financial sector. The effects were as follows:
 The number of jobs was affected as there are many banks which are operating in UK
and are EU based so they need to change the policy of their banks.
 The investment was decreased as the investment banking deal with the creation of
capital for the other companies, government and entities. They include the debt and equity
securities and the equity securities of many banks were lower down.
 In 2015 according to global banking annual review there was a threat of digital
technology and the interest rate recover and ROE was reached to 9.3% in 2025
On 23rd June 2016, with around 51.9% vote UK decided to leave the European Union
by invoking the Article 50 of the Treaty on EU and Britain will leave it by the mid of 2019.
This famous decision in general terms is known as Brexit and thus forming UK a single
market. Whole of UK and its economy was certainly hard hit by this decision; the value of
Pound came to its lowest of 31 years against that of US dollar. Trade and investment within
the finance sector also effected UK after Brexit (Lim, 2017). As London is regarded as the
financial capital of Europe so the impact of Brexit was harshly seen on it as well. During the
membership of EU, UK was holding the world’s largest single market with having 500
million people and the GDP of 13 trillion pound. Now, Brexit will be influencing the banks of
UK and EU as well to identify the operations and structure and the bank are all set under the
free trade agreement. This free trade agreement was made by the countries of EU and having
the legal commitments so that they can trade including the financial sector of UK (Alhajji,
2017). Like one of the biggest bank of UK, HSBC is now announced that they have decided
to remain in UK only and will no more be a part of EU as HSBC is having its headquarter at
London. HSBC need to decide whether they would be doing the operations in other countries
of EU or not. If they are doing the business then what will be the infrastructure changes
which will be taking place and so on. It was predicted that UK based all banks which are also
operating in EU would be no longer be able to sell their services in any of the country of

Europe. Also, other banks of EU will likely be scaling down their operations in London or
any other city of UK.
This will in turn slow down the growth and access to their market in form of trade and
investment. The political shortcoming of UK will now not be affecting the EU or its nations.
Moreover, the trade implication on UK after Brexit will surely be seen in the coming one year
(Dhingra, Sampson and Van Reenen, 2016). After its exit from the EU without any free trade
agreement will also be affecting the mutual membership of both EU and that of UK in the
World Bank. Britain is very less dependent on the intra-regional trade as compared to EU
which shows that:
 UK is having the central position in transatlantic commerce particular with that of US.
 UK as a country is extensively involved in rest of the world including with the
Commonwealth nations.
UK is having very good and healthy relationship with all other nations of the world.
But it is argued that after Brexit, the UK position in the world and global trade will be
weakened and that the country is having collective bargaining power with EU (Lim, 2017).
Brexit not only mean Britain's exit from EU but also from its customs union, its common
external tariffs' regime as well. UK is placed among the top 10 countries in international trade
in terms of export and import of merchandise category. By $137.4 billion surplus, the deficit
of trade was set off in service related trade and UK is the 2nd largest leading exporter of
service.
Q3 Evaluating possible challenges and opportunities of multinational enterprise in finance
sector on post Brexit.
All types of company are affected by the decision of Britain to leave EU by the mid of
2019. The multinational enterprise of Britain which are operating outside UK and in EU. And
also those which are a part of UK and home country are there in EU and affecting post Brexit.
The challenge which these MNE are facing is that of capital investment and policy formation.
They need to form the policy now as per the requirement of UK and not of EU and the
investment will also be decreased. The companies which were a part of collaboration with the
other country outside Europe need to formulate their policy once again.
As UK been the part of Commonwealth country and enjoying the global trade
landscape with the major countries of the group. After the decision to leave the EU UK is
emerging as a single nation without any other external help (Commonwealth Trade review,

2015). In the year 2008, when the global crisis and economic slowdown took place UK was
the most hardly hit nations of world. Then after 2012, annual trade growth of world economy
as whole was around less than 3% against the long-time growth of 7%. There was gradual
decrease of trade and GDP of UK and that of the world as well in the year 2012. The
multinational enterprise of UK was also hardly hit and their growth was affected by this
decision. Many of the employee in MNE lost their job and about 30 companies were affected.
All these 30 companies in Standard and Poor (S&P 500) of the index of stock exchange and
to generate more sale than other in UK. This sale was affected and lower down by 16% after
Brexit was announced (Brexit insights for multinationals, 2017). The factors are all driven by
the rapid growing trade of developing nations of world which are emerging and making more
and more profits than the developed nations. The challenges which are faced by the MNE
after Brexit in finance sector of UK will be as follows:
 The cultural difference faced by MNE is the most important one as they are not
having the ability to adapt the changes.
 Political instability is also a kind of challenge faced as there are many type of
government in which they need to perform with and then do their business.
 The market segmentation is related to the low spending money which is the major part
of the market and development.
 Balancing the price and quality of goods and service are also types of challenges
which the multinational enterprise is facing and that too after Brexit.
 Lack of intellectual property rights protection and high number of tariffs which lead
to slow down of economic growth of the MNE.
 Corporate social responsibilities are also increasing nowadays but the MNE are not
able to face these challenges in all the countries of the world so they are required to
maintain the balance of economic development with social responsibilities.
 The challenges like that of high price instability, transactional risk, regulatory risk,
income risk and growing accounting risk are also there.
The opportunities of MNE after Brexit will be as followed:
 All the countries which are opened to international banking will be benefited from
global flow which can be of fund, knowledge or opportunities while regulatory
challenges are very much complex.