Impact of Brexit on UK & EU

This report examines the impact of Brexit on the UK and the EU. It begins by outlining the EU exit process as defined by Article 50 of the Treaty on European Union. The report then analyzes the economic consequences of Brexit for the UK, including the decline in the value of the pound, potential impacts on immigration, and increased trade costs with EU countries. Despite initial predictions of negative economic consequences, the UK economy showed some resilience. The report also explores the impact on existing EU members, noting concerns about potential further exits and the rise of Euroscepticism. Finally, the report contrasts the potential impacts of a 'hard Brexit' versus a 'soft Brexit' on both the UK and the EU, highlighting the potential for significant welfare losses under various scenarios. The report concludes by emphasizing the far-reaching and complex consequences of Brexit on the global and European political and economic landscapes.

Running head: IMPACT OF BREXIT ON UK & EU
IMPACT OF BREXIT ON UK & EU
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1IMPACT OF BREXIT ON UK & EU
EXIT PROCESS OF EU:
For any countries to leave the European Union, it has to undergo a process maintaining
legal and political requirements. The membership under the union is subject to specific law and
one such law included in Article 50 provides right to the member countries to leave such union
anytime. This article under the Treaty of European Union empowers members to withdraw its
membership following legal process abiding by the constitutional requirements (Kierzenkowski
et al. 2016). A country willing to leave, first has to give notice of its intention to leave to the
European Council in order to initiate the procedure of withdrawal agreement to be generated and
negotiated between EU and the nation. Since the day agreement is signed, all the existing treaties
of EU become no longer applicable to the country decided to exit. The withdrawal agreement
negotiation involves a time of 2 years, which is known as sunset period. The Council makes
brings forth the conclusion to the agreement on behalf of the Union. The conclusive agreement
specifies the post exit relationship between EU and the nation withdrawing from it. The
negotiations are made following the article 218(3) under the Treaty on the Functioning of
Europe (Wadsworth et al. 2016). On receiving the consent from the Parliament of Europe,
Council approves the agreement following the action of qualified majority.
BREXIT IMPACT ON UK & EU:
The former Prime Minister of the Britain David Cameron being in favor of continuing
membership with the EU, apprehended an economic crisis in the post-Brexit UK. After the
referendum came into operation, the national currency pound steeply slumped and remained 10%
lower than dollar and almost 15% lower than euro. Immigration being the greatest reason behind
driving Brexit, are expected to remain still high even after successful exit of Britain from the

2IMPACT OF BREXIT ON UK & EU
Union due to the fact that many European citizen earns their livelihood depending upon UK
economy (Pisani-Ferry et al. 2016). The impact of Brexit would be detrimental to the trade
relation between UK and EU as the trade cost of Britain will rise. Almost half of the UK’s entire
volume of trade takes place with European countries and following the Brexit UK is not eligible
to reap the benefit of relaxed trade between EU countries.
Due to higher cost of tariff and non-tariff barrier implied in the international trade the
country would suffer loss of trade further reflecting the loss of national income and reduced
economic growth. As per the report of CBRE Group, a property firm, the incident of Brexit has
called for more risk for the property markets, which is associated with uncertainties (Goodwin
and Heath 2016). Many economists expected Brexit to create short-term volatility in the market
and showed positive sign toward the long term prospects of the economy. The country remains
attractive toward foreign direct investment keeping the confident of the investors robust. Against
the negative prediction, the UK economy estimated to grow by 1.8% in 2016 preceded by
Germany growing by 1.9% among the G7 industrialized countries. The EU countries, importers
from UK would be affected by the brexit due to the lower trade stemming from higher trade
barriers and increased trade cost.
BREXIT IMPACT ON EXISTING EU MEMBERS
In the history of the British international relation, the referendum has been significant
incident having far-reaching impact on the domestic as well as global economy. The political
landscape of the entire Europe is also influenced and instigated by it. Following a recent voting
undertaken by YouGov majority of six countries out of 7 have intended to take an exit from the
EU. 69% of the citizens of Sweden believe that post-Brexit the exit of the nations would raise

3IMPACT OF BREXIT ON UK & EU
(Dhingra et al. 2016). According to the political risk analysts, the broader picture of the effect of
referendum is irrespective to the worldwide presence of euro skeptic and populism, even though
the referendum triggers nations under EU to take decision of leaving, the process would be no
immediate and fast with much doubt.
SOFT-BREXIT OR HARD-BREXIT: IMPACT ON EU
The hard-Brexit refers that UK would leave the entire EU driven by single market
mechanism. Such would disrupt al the trade-taking place between EU countries including UK.
The trading partners of Britain would suffer loss of trade along with Britain who incurs higher
cost of trade if it continues trade with European countries. Hard-Brexit would induce the country
carry out international trade under the World Trade Organization regulations (Dorling 2016).
This allows UK to take participation in world trade beyond the EU countries. Contrastingly,
Soft-Brexit allows UK the option of staying in single market even after exiting from EU.
Applying multi sector multicounty general equilibrium model, it has been shown that the Brexit
would cause loss in the welfare by 2.6% the benefits of the Brexit in form of lower immigration,
better regulation and more trade with non-EU countries can actually do less to offset such loss
that in presence of dynamic model shows greate loss in the welfare almost by 9.5% incorporating
productivity effects.

4IMPACT OF BREXIT ON UK & EU
REFERENCE
Dhingra, S., Ottaviano, G., Sampson, T. and Van Reenen, J., 2016. The impact of Brexit on
foreign investment in the UK. BREXIT 2016, p.24.
Dorling, D., 2016. Brexit: the decision of a divided country.
Goodwin, M.J. and Heath, O., 2016. The 2016 Referendum, Brexit and the Left Behind: An
Aggregate‐level Analysis of the Result. The Political Quarterly, 87(3), pp.323-332.
Kierzenkowski, R., Pain, N., Rusticelli, E. and Zwart, S., 2016. The Economic Consequences of
Brexit.
Pisani-Ferry, J., Röttgen, N., Sapir, A., Tucker, P. and Wolff, G.B., 2016. Europe after Brexit: A
proposal for a continental partnership (Vol. 25). Brussels: Bruegel.
Wadsworth, J., Dhingra, S., Ottaviano, G. and Van Reenen, J., 2016. Brexit and the Impact of
Immigration on the UK. Centre for Economic Performance. LSE, pp.34-53.