Strategic Analysis of Trade Agreements and Brexit in the UK

This report provides a strategic analysis of the United Kingdom's trade agreements following its decision to leave the European Union (Brexit). It examines the economic implications of Brexit, focusing on the challenges and opportunities in establishing new trade relationships both within and outside of Europe. The report includes a literature review that discusses the historical context of Brexit, the negotiations, and the anticipated impacts on trade costs and economic performance. Data is collected from government sources and economic journals to illustrate the effects of Brexit on production, services, construction output, and inflation. A PESTEL analysis is conducted to assess the political, economic, social, technological, environmental, and legal impacts of Brexit. The report also includes scenario analysis models to project potential outcomes. The findings suggest that the UK faces significant economic challenges, including potential trade deficits and social divisions, and the report offers recommendations for mitigating these impacts and ensuring economic stability. The report concludes by emphasizing the need for strategic policy adjustments to navigate the post-Brexit trade environment.

Running head: STRATEGIC ANALYSIS
Strategic analysis of trade agreement and brexit
Name of the student
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Table of Contents
Introduction......................................................................................................................................3
Literature Review............................................................................................................................3
Data Collection................................................................................................................................6
Figure No 1- Index of Production....................................................................................................7
Figure No 2- Index of Services........................................................................................................8
Figure No 3– Construction of Output..............................................................................................9
Figure No 4- Inflation Statistics of United Kingdom....................................................................10
Data Analysis.................................................................................................................................10
PESTEL Analysis..........................................................................................................................11
Scenario Analysis Models.............................................................................................................13
Results............................................................................................................................................15
Recommendations..........................................................................................................................15
Conclusion.....................................................................................................................................16
List of References..........................................................................................................................17

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Introduction
The following research has been conducted to determine the current scenario of trade
agreements after the decision of United Kingdom to leave the European Union. The study will
determine the different measures adopted by the Government of UK to make sure that they does
not face any economic crisis after their departure from European Union. The country must have a
proper and efficient strategic policy so that it can establish trade agreements with the other
countries both in Europe and also outside Europe.
Literature Review
The decision of UK to leave European Union, its largest trading partner will have a
serious outcome on trade in UK in the coming days (Andersson,S. and Nilsson, F. 2016).The
reduction in the trade costs between the European Union members and the rest of Europe has
been a phenomenal decision after Brexit and it will shape up the way in which the country
determines the path to success. The key factor behind the reduction of the trade cost has been the
reduction in the non tariff barriers that has led to the creation of a single market in all of Europe
(Bruno et al. 2016). The BREXIT case can be best explained by means of a short story.
The United Kingdom along with the other parts of the world woke up to the morning
news that U.K would been entering a referendum of vote to make sure that The European Union
is a historic referendum by a margin of 52% to 48%. However the now official BREXIT has
been gradually building from the past. There were earlier cases where Britain showed signs of
emerging out of the European Union.

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1. A referendum was held 40 years ago
In the year 1975 the ruling labor Government held a vote of refere4ndum on whether the
country would be leaving the European Economic Community (EEC) which was the
precursor of the European Union. However the vote turned out to be in favor of Britain
staying in the body to a majority of 677% to 33%.
2. A lot of Efforts since then to hold another election
There were many attempts since the election of 1975 to make Britain stay away from the
main European body. The labor party attempted to win the elections of 1983 by fixing the
agenda of helping Britain to move out from the European Economic Community if they win the
elections. However such an attempt failed miserably as because they lost the elections by a huge
margin. The European Economic Community transformed into European Union in the year 1993
and a new party was formed in the United Kingdom with the name of the referendum party. The
1997 elections were contested by the party on the promise of holding a similar referendum if
they win the majority of the seats in the British Parliament (Andersson,S. and Nilsson, F. 2016).
The party however failed more miserably as it was able to win just a meager 2.6% of the seats in
the parliament.
The BREXIT negotiations began in Brussels, the capital of Belgium. David Davis
represented UK while Michel Barnier represented the European Commission. The European
Union and United Kingdom are all set for a divorce but the only concern of the European Union
is the trade agreements between Europe and the other countries. The trade concerns of the
European Union remains the major hurdle that must be negotiated and cleared. According to

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Michael Barnier the main aim of the meeting is the need to sort out the uncertainties that are
caused by the referendum of Britain leaving European Union. It is important to tackle the
uncertainties of the BREXIT and make sure that countries like Ireland does not get affected from
the new political changes within Europe (Dhingra, S. Ottaviano, G. and Sampson.T 2017). On
the other hand the negotiator from the part of United Kingdom put forward a much convincing
tone and described that the friendly ties and affections will have no impact on the new political
scenario of the region (Bruno et al. 2016). The economic experts are of the belief that the trade
negotiations will be decided mainly by the European Union and UK will have very less power to
determine the trade dealings. Three negotiating groups will be addressing the priorities on the
rights of the citizens, finances and other technical matters. The Ireland issue is one of the critical
factors that must be addressed in a proper way so that the country does not face any trade
sanctions from European Union. The European Union has made its stand clear on the fact that it
is UK that has opted to come out of EU and thus there must be some consequences of such a
decision.
The performance of UK post Brexit is assessed in the following research. The widening
deficit in the current account of UK has been a cause of great concern since the financial crisis.
The trade deficit of the country including the good and services has become stable in the recent
years than the overall balance payments position. There is a considerable gap between the
imports and the exports on the gross domestic production of the country. The nature of trade in
Brexit has been the old one like the main effect of the trade regulations in Europe and the
surrounding countries. The nature of the separation deal of UK with the European Union has a
important bearing with the trade implications with EU (Andersson,S. and Nilsson, F. 2016). The

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Transition period between the exits of UK from European Union will allow the different business
organizations and the workers that work in accordance with the laws and rules of the European
Union to adapt to the new policies and procedures. The trade costs between the countries that are
under the European Union have been declining rapidly at a speed of 40% between the OECD
countries (Crafts,N. 2017). UK has to keep itself steady and focus on the improvement of the
economy in the coming days. The status quo must be maintained by UK in the European market
and thus they need to change the policies. However they must not change any rules for trade with
countries outside Europe. The country has already declared that they will be maintaining a trade
deal with the European Union that allows in duty free and quota free imports from a large
number of least developed countries like some South East Asian Nations and African countries.
This helps the following countries to benefit from the trade as well as helps UK to establish its
presence over the region. If the UK can maintain its current trade agreement the total serving
countries would stand at nearly 80. A similar move will be to treat the 23 European Union
countries in the same way after BREXIT (Whitman 2016).
Data Collection
The information regarding BREXIT and the related economic terms and trade agreements
was basically collected from the different types of government sources and from economical and
business journals. The researcher took the help of some eminent economists to collect their ideas
regarding trade analysis of the country after their exit from the European Union. Almost every
economist believed that trade will have a serious impact after such a development. As mentioned
earlier the country will have no say in determining the policies of the trade as because the
European Union permits any country from making any policies or not accepting the policies

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(Dhingra et al. 2016). The country after entering an agreement with the EEA will ensure their
presence and benefits from single trade zone. The government can also negotiate with other
countries to establish a fair trade policy to revive its economy. The leading business journals of
UK were taken as a source to complete the project. The researcher used some figures to illustrate
the reality of the following research.
Figure No 1- Index of Production
Source- (www.ons.gov.uk)

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Figure No 2- Index of Services
Source- (www.ons.gov.uk)

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Figure No 3– Construction of Output
Source- (www.ons.gov.uk)

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Figure No 4- Inflation Statistics of United Kingdom
Source- (Crafts,N. 2017)
Data Analysis
It can be clearly seen that UK will suffer a huge jolt because of its decision to leave
European Union. The economic, legal, political and legislative policies of the country must be
structured in a new manner to make sure that the country faces no difficulties while arranging the
smooth exit from the European Union. The figures as highlighted by the researcher have
revealed some important facts that are clearly related with the economic aspects of UK (Crafts,N.
2017). The first figure clearly represents the production index of United Kingdom in the last
couple of years. It is clearly seen that there was a sharp fall in the production during the

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economic crisis of 2008. The industry recovered slowly after that period but it faces uncertainty
in the near future after the occurrence of BREXIT (Dhingra et al 2016). The second and third
figures has portrayed in this report shows the service index and the construction of output which
shows the current state of affairs in the service sector of UK. The last and final figure shows the
inflation rate that the country has been facing. Though the inflation rate dipped after the crisis of
2008 but the present situation has made the inflation rate dip up once again.
PESTEL Analysis
Political
 The political fallout of United Kingdom from European Union is just a few years away as
the referendum of the process has already been started and the political situation of the
country is already chaotic. The supporters of Scottish independence have raised their
tones for formulating a separate referendum to make way for the Scottish independence
from United Kingdom and end the period of autonomy (Busch, B. and Matthes, J. 2016).
Economical
 The markets are in free fall at the moment and the pound is down against all the
currencies of the region. The following is a serious issue as the continuous downfall of
the currency is one of the main concerns of the organization.
 There are other issues related to the foreign firms operating in UK. A number of foreign
car manufacturers like BMW, Honda have their plants located in Swindon and
Sunderland. These areas receive the highest amount of grants from European Union and
thus the future lies in shambles.

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Social
 The BREXIT effect has taken serious toll on the social life of the Britons as the society is
faced with racial discriminations and hatred. Much immigration are being constantly
threatened to leave Britain or face the consequence. The country is totally a divided
nation with every community divided with each another.
Technological
 A huge amount of grants is received by UK from the European Union. There is no such
surety on whether the government of UK can supply the same amount of grants on
different purposes post BREXIT (Busch, B. and Matthes, J. 2016).
Environmental
United Kingdom receives a significant amount of money for different environmental
projects from the European Union. These may be paused after Britain’s separation from the
European Union. The green Energy Fund will also come to a halt as because the funding will no
longer be in existence after UK retreats from the European Union.
Legal
 The Legal system needs a total revamp as it is totally integrated with the European Union
laws. The laws and enactments must be rewritten.
 The parliament will have a tough time to cope up with so much acts and laws that it
would be difficult for them to enact the constitution

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Scenario Analysis Models
Some of the possible Scenario of Post BREXIT are as follows;
1. Absence of legal deals
The absence of any legal deals would ensure that the UK will no longer be bound by any
form of European Union treaties and can also formulate their own agreements.
Advantages
A totally independent Britain would help to strike a deal with any country both within the
European Union as because they were restricted to deal in any such trade agreements before the
exit.
Disadvantages
The lack of customs facility will provide a problem for trade in borders especially in Ireland.
Transportation will also take a hit as British trucks and buses would not be allowed to ply in
European Union zone.
2. Agreement only on Separation
The government of UK is ready to sign a Article 50 agreement with the European Union
over its departure from the bloc. However future trade relations with the European Union and
the UK would depend mainly on negotiations that would be carried out by the World Trade
Organization.

14STRATEGIC ANALYSIS
Advantages
Such trade deal will be making United Kingdom self sufficient. The local suppliers and
the local industries would now make a name for themselves in the UK market which was
otherwise tough for them in the presence of quality foreign companies. A free trade deal will also
ensure the increase4 in the grant of the UK government to the local companies.
Disadvantages
Tariff and non tariff barriers would have an impact on the European Union and United
Kingdom trade. All the sectors starting from agriculture to meat and engineering goods will see a
sharp rise in the tariff.
3. Customs Union
If the government of UK agrees to new union trade then the country will be able to chalk out
new domestic regulations whereas international regulations will be controlled totally by trade
deals formulated by the European Union.
Advantages
The absence of physical checking that goods are not outside the customs union and the
local companies will be benefitting from the trade deals with European Union that are currently
being negotiated.

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Disadvantages
Though there would be no checks on the goods but the sensitive goods that does not
adhere to the guidelines of the European Union will have extensive round of checks and delays
that would be much more rigid than the checking existing in the present day.
Results
The research done on the following topic has been exceptional and has been able to find
out a number of different types of implications of Britain leaving European Union. Though it is
quite tough to leave the European Union waters and hunt on new seas UK will have to meet the
challenge in order to gain a supremacy over trade in the continent (Bruno et al. 2016). The use of
the benefits of the single market and many other similar benefits will be helpful for UK to carry
on healthy trading relationships. The Government must constitute new policies and rules and
make sure that they are implemented in a proper way so that UK economy shakes off from its
initial jolt and steer towards a better future (Jensen, M.D, and Snaith, H. 2017:1302-1310).
Recommendations
The literary review has shown the ongoing negotiations between the UK and the
European Union. The time when it comes to strike a free trade deal with the European Union, the
UK has to head start over nations like Canada, South Korea and Hong Kong. United Kingdom
has no such tariffs, quotas and customs to overcome with a clear trading policy already carved
out. The United Kingdom also has legal and regulatory equibalance with European Union that
will help it to formulate new policies to carve out easy negotiations (Nilsson, Andersson. 2017).
The European Union also believes that Britain can sign good trade agreements even if they do

16STRATEGIC ANALYSIS
not remain in the continental body. The main discussion that has started between UK and the
European Union has started on a positive note and both the parties expect to come to a common
agreement so that no party suffers. UK has also declared that European Union along with the
other allies of Europe will continue to have a positive and friendly relation and will come out in
all aids in times of crisis.
However the main aims of the UK government must be to ensure that they should amend
the constitution totally so that after the BREXIT happens the country can have their own set of
rules and regulations. It is the immediate task of the government to appoint and establish
different commissions which can recommend their ideas to the Government so that they can
implement the ideas and make arrangements for free trade and other important aspects that are
considered to be important to effectively have an independent United Kingdom.
Conclusion
The researcher has been able to highlight the present trade agreement of UK which was
the main theme of the research. The researcher had also made his research compact by displaying
the different statistics of the current trading patterns of the country. The readers will acquire a
clear idea about the trading future of United Kingdom after the Brexit and can have a transparent
idea about the Norwegian model of trade in the particular report. The report can be a great source
for the researchers who will undertake to analyze on the aforesaid topic in the future. Though the
research was able to meet all the objectives, absence of different other meaningful data and
diagrams have limited the scope of the project which can be increased on other works.

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List of References
S, Andersson, and Nilsson F. What Can Fixit After Brexit? An Empirical Study Of The
Economic Effect On UK Trade, Following An Exit From The European Union. 2016. Print.
R, Bruno, R., Campos, N., Estrin, S. and Tian, M., 2016. Technical Appendix to ‘The impact of
Brexit on foreign investment in the UK’Gravitating towards Europe: an econometric analysis of
the FDI effects of EU membership. et al. Technical Appendix To ‘The Impact Of Brexit On
Foreign Investment In The UK’Gravitating Towards Europe: An Econometric Analysis Of The
FDI Effects Of EU Membership. 2016. Print
B, Busch, and Matthes J. Brexit-The Economic Impact: A Meta-Analysis (No. 10/2016). IW-
Report. 2016. Print.
N, Crafts. "A New Industrial Strategy: Making Britain Great Again?. The Political
Quarterly." The Political Quarterly 88(2), pp.315-319 (2017): pp.315-319. Print.
S, Dhingra, Ottaviano G, and Sampson T. A Hitch-Hiker’S Guide To Post-Brexit Trade
Negotiations: Options And Principles,Oxford Review Of Economic Policy. 2017. Print.
S, Dhingra et al. The UK Treasury Analysis Of'the Long-Term Economic Impact Of EU
Membership And The Alternatives': CEP Commentary. BREXIT 2016. 2016. Print.
S, Dhingra et al. The Consequences Of Brexit For UK Trade And Living Standards. 2016. Print.
Jensen, M.D, and Snaith, H When politics prevails: the political economy of a Brexit. Journal of
European Public Policy, 23(9), pp.1302-1310 (2017): pp. 1302-1310. (Jensen, M.D, and Snaith,
H. 2017:1302-1310)

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J, Keane, and Secretariat C. Brexit And Trade In Services: Securing Future Gains. The Impact Of
The UK's Post-Brexit Trade Policy On Development. 2016. Print
E, 'Lydgate, Rollo J, and Wilkinson R. 2017. Print.
M, Mendez-Parra, te Velde D.W, and Winters L.A. The Impact Of The UK's Post-Brexit Trade
Policy On Development. 2016. Print.
E, Owen, and Walter S. Open Economy Politics And Brexit: Insights, Puzzles, And Ways
Forward. Review Of International Political Economy. 2017. Print.
R.G, Whitman. Brexit Or Bremain: What Future For The UK's European Diplomatic Strategy?.
International Affairs. 2016. Print.
G, Ziv et al. The Potential Impact Of Brexit On The Energy, Water And Food Nexus In The UK:
A Fuzzy Cognitive Mapping Approach. Applied Energy.'. 2017. Print.