Principles and Applications of Macroeconomics: Brexit and UK Policy

This report examines the impact of Brexit on the UK's monetary policy, exploring both positive and negative consequences. It discusses how Brexit has enabled the UK to establish independent trade deals and regulations, potentially attracting skilled labor and boosting job opportunities for UK citizens. The analysis also covers the depreciation of the pound, trade barriers, and the effects on foreign direct investment. The report further considers the challenges faced by businesses, including increased complexities in international trade and new regulatory hurdles. It also highlights how some businesses are adapting strategies to overcome these negative impacts. Desklib offers a platform for students to access past papers and solved assignments related to this topic.

Principles and applications of
Macroeconomics

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
Using economic policy analysis and evaluating the positive and negative impact of Brexit on
UK................................................................................................................................................3
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Macroeconomic policies are developed with the aim of achieving some kind of
macroeconomic goals so that the country is able to conduct business in proper way. Also, the
present report is based on the monetary policy of UK this is made to keep the inflation rate low
and stable. Furthermore, the study will analyse various positive impacts of Brexit reforms on this
policy so that all the work of the country is conducted in right and appropriate manner.
Moreover, the report will also analyse how the monetary policy in UK helps the business and
increase the possibility of more investments in the country in the long run. Furthermore, the
significance of monetary policy in promoting political freedom in the country will also be
discussed in detail. Moreover, the study will highlight positive impacts of such Brexit reforms in
terms of increasing the standards of living and providing better consumer benefits in UK people.
Also, the report will analyse certain negative impacts of the new Brexit reforms on the
already established monetary policy in the country and will also explain how these have
impacted on the working of business and its people living in and around UK. Furthermore, the
study will identify certain negative changes that have been brought through the Brexit reforms on
the small firms that wish to expand in other regions and the country in the future for capturing
more market share. Also, negative economic impacts in terms of reduced investment and
shortage of skilled workers will also be discussed in detail under this report. Lastly, the report
will identify how various business have devised certain strategies and polices in overcoming
such negative impacts of the Brexit so that working becomes easier and better sales of the
business might be ensured in due course of time.
Using economic policy analysis and evaluating the positive and negative impact of Brexit on UK
Monetary policy in any country is made to ensure that overall money supply is controlled
and sustainable economic growth in the country is achieved. Also, monetary policy in the
country might be explained either as expansionary or contractionary to wither increase or
decrease the money supply in the country depending on the current situation of the country.
Also, at the time of its formulation in the country certain factors are been looked such as gross
domestic and inflation, growth rates and much more (Hendry and Muellbauer, 2018). Moreover,
monetary policy in UK is enacted by the central government so that economy might be kept on
the certain level for better operations. Furthermore, monetary policy consist of three main tools
such as open market operations, reserve requirement and discount rate. Also, the monetary policy

in UK has allowed the people to borrow certain amount of funds to start-ups small business
especially in those time when the economy is growing down and people require fund for conduct
of activities.
Furthermore, with upcoming of new Brexit reforms where United kingdom existed from
European union created both positive and negative impacts on operation of various business in
UK. Also, in terms of positive impact of the Brexit it can be said that the country has the benefit
of having their own trade deals and regulations so that they are not dependent on others (15
Advantages and Disadvantages of Monetary Policy Tools, 2022). Moreover, the country has now
the benefit of making the law of their own that has encouraged more of skilled labour force from
outside to come to United Kingdom so that better growth and economy of the country might be
developed (Atkinson, 2020). Also, with the new reforms monetary policy has also been benefited
as UK would be no longer paying the European budget contributions that was earlier paid in
terms of liabilities as being the partner of. Moreover, monetary policy of the UK has allowed in
increasing the job opportunities in the countries for UK people that earlier was limited because
of not having Brexit reforms.
Thus, more people have now more business opportunities in their won country and thus
standards of living are also increased. Also, the purchasing power of the people have also been
increased due to which they are able to purchase of variety of goods even at little higher prices
than earlier. Also, the positive impact of the Brexit reforms on monetary policy of the country is
that more UK people are encouraged by the government to start up their own business as
providing large amount of funds thus promoting the welfare of the country. Furthermore, Brexit
reforms had been provided better for the monetary policy as it had open up new opportunities for
the growth for UK business (Teh and Shanmugaratnam, 2021). For instance : The fall of pound
had made the British products cheaper and easily available in different international markets that
made more appealing to the potential customers that are requiring the goods that are produced by
the UK market thus increasing the market share on the larger scale.
Also, with the better planning and development of the strategies now the UK has the
option to uplift the economy through creating better health and welfare activities' within the
country so that people do not have to face many difficulties in availing different services within
the country (Karmakar, 2021). Also, with the increase in funds after the Brexit reforms in the
country the government would be able to plan better development activities so that people of the

country are able to live happy life and less dependent on others. Moreover, the monetary policy
had also been improved in the manner that the government is encouraging more exports so that
extra revenues in the country is generated that would help in increasing the gross domestic
product (Brinca, 2020). Furthermore, monetary policy in the country has encouraged more
economic activity within the country and also ensured that there is much transparency in the
country so that people are about to know what are the areas of improvement after the new
reforms and what actions are allowed to be taken for promoting more growth in the UK. Also,
such types of activities within the country would ensure that inflation rates are very low and the
all UK business structure remain stable for longer time period.
 Due to Brexit many people are having more effective opportunities in different
markets as they can have new deals regarding trade (Lawless and Morgenroth,
2019). It is noted that Brexit will impact trade with other locations of the world,
but the major positive impact in leaving the EU was the abilities to sign effective
trade deals and fresh agreements with other nations by simply following rules and
regulations. Hence, it is said that UK's economy has ability to develop
partnerships and focus on new emerging and customer markets which may be
beneficial for firms long term achievement and accomplish task in the future.
While immigration changes come with great challenges, there are also few opportunities.
Before Brexit, The free movement of people in the EU have force the government of UK to limit
non EU immigration. But now due to new system related to trade and regulations, EU citizen no
longer get special treatment and more benefits, which makes it easier for staff members to hire in
non-EU countries in order to gain opportunities. Hence, it is noted that Brexit has provided great
talent pool in the country.
Now, Firms can easily trade and do their work effectively just by following fewer
regulations and policies. Before, Brexit many business owners was feeling overburden and more
interference in their regular business activities and practices. This has impacted their earning and
profitability. But after Brexit organizations have more freedom and may be able to save money
for their future requirements just by following regulations and policies which is mandatory to run
their business smoothly. Hence, it is noted that Brexit is good for UK as it can control democracy
and money, help them to level up across the country. It also benefits them in such a way that it
provide freedom to regulate in a most appropriate way.

Negative impact
After Brexit, one can get clearer picture of both the positive and negative impact created
by this big decision. However, it is worth noting that the COVID-19 has also impacted many
aspects of the economy, so not all the major changes people have faced in the year 2020 -2021
can be solely attributed to Brexit. There are major long term positive effects which can provide
benefit to society and overall growth of economy.
Brexit will lead to major change in the relationship of UK with other EU countries and
could reopen the opportunity to deal regarding trade negotiation with non EU countries.
Everyone knows that process of Brexit has impacted many businesses and living standard of
people (Lawless and Morgenroth, 2019). This process involves rearrangements of trade
regulations and permits of residence. Every people in the UK has been affected by Brexit just
because of potential economic impacts such as recession and reduced investment. Due to
manpower issues during Brexit time the citizen of UK has to deal with lot of challenges. Just
because of Brexit, thousands of financial services jobs and assets has already begun moving out
of the UK to other countries such as EU, which has distributed so many people and their living
standards (Bloom and et.al., 2019). Just after Brexit officially took place, Financial institutions of
UK could no loner trade with member of EU states without having special considerations and
authorization in order to operate within that particular locations. Due to this, many people was
facing issues related to authorization process and can be more costly and complex to manage.
Depreciation of the pound- due to the announcement done by the government regarding
Brexit, the citizen have to face issues regarding earnings. Due to Brexit, the international trade
would have become more complex which can impact both parties UK and EU. It can force these
two parties to trade on world trade organization by following rules and regulation (Lawless and
Morgenroth, 2019). Both of them have had to start paying more duties related to import on one
another' s products or services. Hence, many businesses such as manufacturing, hospitality and
service industry was dealing with challenges. It also causes volatility and affects businesses
operating and transactions within the UK. Hence, due to this, it has also impacted the raw
material cost and the people have to pay more for raw material cost. This has imbalance the
budget for many people.
Trade barriers- the UK is no longer part of the customs union and it has a agreement
related to trade that allows zero tariffs on goods traded. Trade barriers can be reduced by

eliminating non tariffs or removing trade tariffs barriers to trade. Due to this, the trade between
countries has been affected and this has decrease the economic output and has impacted growth
of economy. According to Portes and Forte, (2017) , Brexit will show new trade barriers with the
EU- Which are likely to decrease development and growth of economy and trade flows. The
higher the trade barriers it would decrease the output of economy by 2.9% in the year 2030.
Regulation related to trade has impacted many people because they have to follow new riles and
paperwork. This has put a strain on firms and few of them are changing their practices which is
difficult task.
Foreign direct investment- it contributes directly to national income, which provides
additional funds to company so that they can easily invest in expanding their businesses. FDI can
also help increase productivity by providing access to new ideas for firms from abroad.
According to Bloom and et.al., (2019) ,attractiveness of UK to foreign investors is closely tied to
trade, because of Brexit the foreign investors has to deal with many issues regarding supply
chain management at global level. Just because of Brexit, the country's living standard has been
affected as foreign investors won't be able to invest.
Regulations- rules and regulations impact how cost effectively businesses in the country
are able to utilize capital, employees and technology in order to produce output and generate
results. At the time of Brexit, the companies and people have to strictly follow more rules and
regulations, aiming to ensure that certain objectives and goals (Wadsworth and et.al., 2016).
They have to face more pressure in order to handle legal compliance to maintain global platform.
It includes regulation regarding environmental protection and health and safety of people. Due to
heavy competition, the businesses were forced to achieve cost-effectiveness and achieve some
protections act.
Migration- the migration from the EU and other country- after Brexit could also have
impact on long term economic growth and development. Due to migration of skilled and
unskilled employees or workers can have direct affect the overall growth of economy. Hence,
changing the workers' numbers, changing migration and mixing of skills can also impact the
level of innovation within the economy. Just because of this, the country has to suffer in terms of
GDP (Davies and Studnicka, 2018). A change in migration have all assumed that overall
migration to the UK will reduce GDP. If the country focus on FDI, GDP and trade then they can
easily strength trade relationship with other country. It has been noted that lower FDI, GDP will

also lead to lower productivity and people prefer to migrate in other country which can impact
growth of economy.
Negative effect of Brexit on the labour market of UK
The major affect of Brexit on companies is the change in immigration. Before Brexit, UK
was a part of the EU many EU citizen came to the UK for jobs and started working in varieties of
industries which includes manufacturing, hospitality, tourism and agriculture (Portes and Forte,
2017). These workers included both highly skilled experts with good knowledge and skills and
also blue collar labourers with required qualification. Now, the free movement of people have
come to an end because of Brexit. Before Brexit, citizens of EU are treated Just like other people
who are working in the companies. But now, post Brexit, the EU nationals have to take
permission and follow rules and regulations before coming to the country in order to work
effectively without any issue. Due to this problem like unemployment has faced by citizens
which affected economic growth and income level. According to Bloom and et.al., (2019)
almost 440 companies moved or were moving part of their business operations to EU from the
UK. As a result, 7400 employees who was living in London was facing issues and has decided to
move out from the country as they believe that people were not getting enough support related to
employment.
It has been noted that immigration and travel are still allowed but not in the similar
manner. The major challenge faced by economy is to firm that can no longer recruit and hired
EU nationals for completing task for temporary purpose and unskilled labour job profile (Busch
and Matthes, 2016). Due to this, people were not able to satisfy their needs and requirement
because they were not earning enough money as compared to pre Brexit.
All the firms hiring and selecting internationally must now sponsor visas and provide
benefits to people. They also have to see whether a candidate even qualifies for desired
requirement related to immigration under the system which is made newly by UK's government.
Supply chain costs- new rules which has been made by UK government could also
impact supply chain management of the country. Especially for those business who purchase
services or goods from an EU country. Supply chain implications for UK small companies was
negatively impacted by Brexit (Dhingra and et.al., 2016). This is just because businesses are not
able to move freely from EU countries. It has impacted agriculture, clothing, agriculture and
food and beverages and financial services. People were not getting enough services just because

of unmanageable supply chains as they were not able to maintain their transportation and
distribution channels.

CONCLUSION
To conclude, Macroeconomic policies are improved and developed with the aim of
achieving some kind of macroeconomic goals so that the country is able to conduct business in
proper way without facing any kind of issues. By evaluating the report, it has been summarized
that the monetary policy of UK this is made to keep the inflation rate low and stable.
Furthermore, the study has evaluated various positive impacts of Brexit reforms on this policy so
that all the work of the country is conducted in right and appropriate manner. It includes great
opportunities related to fresh deals. Along with negative effects, Brexit has also created issues
for companies in various ways. Because of Brexit, companies has to face issues related to supply
chain management. Delays in transportation and border disruption could damage sales and
productivity of the businesses. Due to these regulations firms has to pay more cost for many
activities this has impacted their standards and policy. Moreover, the report has analysed how the
monetary policy in UK helps the business and increase the possibility of more investments in the
country in the long run. Furthermore, it has concluded that the significance of monetary policy in
promoting political freedom in the country has influence the economic growth and development..
Many companies are facing issues related to delaying in goods or products just because
of trade regulation, tariffs and regulation. Having goods or services delayed at UK ports by new
rules checks on both the side of border has impacted logistics management and create problem
for UK small business that sell goods to EU countries. It has also impacted employment of the
country, however Eu citizens can work in the country even after declaration of Brexit, but they
have to follow some rules and regulations, policies and standards and need to apply visa under
the skilled worker visa to work effectively. Moreover, Brexit has created new trade restrictions
and more opportunities for companies to work flexible without any EU interference. Now British
citizen can move as freely around the EU by just following few rules.

REFERENCES
Books and Journals
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Busch, B. and Matthes, J., 2016. Brexit-the economic impact: A meta-analysis (No. 10/2016).
IW-Report.
Davies, R. B. and Studnicka, Z., 2018. The heterogeneous impact of Brexit: Early indications
from the FTSE. European Economic Review. 110. pp.1-17.
Dhingra, S. and et.al., 2016. The impact of Brexit on foreign investment in the UK. BREXIT
2016. 24(2). pp.1-10.
Hassan, T. A. and et.al., 2020. The global impact of Brexit uncertainty (No. w26609). National
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Macroeconomics. Economy Polity Environment: An International Peer-reviewed Journal of
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across the EU. Contemporary social science. 14(2). pp.189-207.
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migration. Oxford Review of Economic Policy. 33(suppl_1). pp.S31-S44.
Teh, K. P. and Shanmugaratnam, T., 2021. Exchange rate policy: Philosophy and conduct over
the past decade. World Scientific Book Chapters. pp.82-113.
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Online

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