Examining the Multifaceted Impacts of Brexit on Businesses in the UK

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Added on 2024/07/24

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This report provides an overview of the potential impacts of Brexit on various types of businesses in the UK. It discusses the changes in business functioning, highlighting both positive and negative effects across industries such as automotive, manufacturing, food, and financial services. The report examines the transition period, potential tariffs, and restrictions on the movement of people, as well as the Bank of England's response. It concludes that Brexit has created uncertainty across trades, emphasizing the importance of future relations between the EU and the UK.

Potential Impacts of Brexit on Business
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Executive Summary
The report will focus o the impact of Brexit on all types of business and will also discuss how
Brexit brings changes in the overall business functioning in U.K. There are number of industries
that are being affected due to this; however, some positive impacts has also not be ignored in this
discussion.
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Table of Content
Introduction......................................................................................................................................4
Findings and Discussion.................................................................................................................. 5
Conclusion....................................................................................................................................... 9
Reference List................................................................................................................................ 10
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Introduction
Brexit is the approaching withdrawal of the United Kingdom from European Union. As per the
referendum on 2016 majority of the voters of UK voted to leave EU and accordingly European
Union Act 2018 has declared that 29th March 2019 will be the exit day. For controlling the
action plan of UK the new U.K government have created the Department for Exiting the
European Union in July 2016.Due to the voting to leave European Union, the pound fell to the
lowest as soon as the result was declared.
U.K has always been considered as the best place to start a business; however, this perspective
could change due to the unknown as well as uncertain effects that Brexit might bring in the
overall market of U.K. Although there are few optimistic predictions for businesses as well as
Britain but there are number of skeptics who believe that this decision is the biggest plunder
done by Britain. It is believed that the impact is going to jeopardize the overall business
functioning of U.K. The task will focus on the impacts of Brexit on business and will lay out the
facts that are related to this historic decision. A balanced argument has been presented in the
report to present a clear overview on the given topic.
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Findings and Discussion
In order to get detail knowledge on Brexit it is significant to know about the transition period
related to this. This period is between 29th march 2019 to 31st December 2020 and this period
will bring everything fall in its own place and even allow business to prepare for that moment
when the post Brexit rules will be applicable after U.K leaves EU (Hobolt, 2016). The period
will also allow time for expanding and creating new relationship within the boundaries of U.K.
Number of industry bodies, economists, consultants as well as business leaders have been
publishing reports on the expected impact of new tariffs as well as potential restriction on
movement of people.
In November, the Bank of England has raised interest rates for the very first time in this decade.
The wage growth has became stagnant and hence the governor of the bank Mark Carney have
explained that economy will be facing few problems in few years and there is an expectant 2
further rise of interest rates will be there before the commencement of 2020. Moreover, business
investment was also overshadowed in the year 2017 and hence Bank have also stated that
business investment will be around 25 percentage lower by the year 2019 and this will hamper
the future productivity growth (Kuznetsova and Khakhalkina, 2018). It is significant to mention
that several industries in Britain have been disrupted due to this. To understand this detailed
discussion on the different form of business has been done here.
Figure1: Post Brexit exchange rate drop against Euro
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(Source: Kuznetsova and Khakhalkina, 2018)
The figure shows the exchange rate of Pound sterling against Euro in between June and July
2016.There was stability in the exchange rate till the time Britian decided to leave referendrum.
Effect on Car Industry
It has been estimated by Motor Manufacturers and Traders that a no Brexit would give the motor
industry an additional tariffs of 4.5 billion £ and it has been warned that incapability to establish
accurate trade deals post Brexit will be irreparably damaging the car industry. Toyota has even
mentioned that they may be compelled to shift their production work somewhere else. According
to a study that has been conducted by HIS Automotive, Brexit will cost more than 2.8 million
sales in the coming two years for the car manufacturers. Autonews have also predicted a fall of
200,000 in the delivery of vehicles on the global market. According to Dhingra, (2016), U.K
with the assistance of its allies has been also working to maintain a market that is stable to attract
automakers as well as manufacturing companies.
Effect on Manufacturing
If Brexit is restricting the free movement of labors and due to upcoming changes in the Visa
policies many of the manufacturing organizations has warned that Brexit will create a cliff edge
if the government fails to provide a grace period to the EU citizens who wish to apply for settled
status post splitting. According to da Costa Cabral et al ., (2017), there are already number of EU
construction workers leaving the country and surveys show that 200,000 construction jobs will
be slashed if U.K have no access to European single market and this can lead to loss of million
pounds of infrastructure projects. Construction industry employs EU labors because they are
cheaper and this keeps the project margins much higher and hence increase in labor charges can
reduce the profit margins. According to Miethe and Pothier, (2016), this has a positive impact on
labor market. This is because more jobs will be created for UK citizens and can thereby create an
opportunity of employing their own citizens.
Effect on Food Industry:
The food industry is one of the most essential businesses among all. It has been significantly
noted that the curry houses of London have hampered severely due to Brexit. Most of the curry
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houses have workers coming from Asian countries and restriction on immigrant movement
within and outside U.K will completely disrupt the ethnic food industry. A report given by
accountancy firm Moore Stepehns due to rise in cost of import of raw materials have put at least
20 % of U.K’s restaurant at risk (Watson et al., 2018). Restaurants like Prezzo, Byron, closed
their sites in 2017.An argument however has been laid forward that Brexit can help the citizens
of U.K get employment in the food sectors by overthrowing the EU citizens and this can enhance
the employment rate within Britain
Effect on Financial Services:
Banks are going to face huge losses due to Brexit and the financial sector has been contributing
12 % to the GDP of U.K. British banks have lent almost 1.4 trillion $ to EU organizations and
governments Financial activities carried out in Europe are indirectly or directly performed out of
London (Moloney, 2017). Moreover, one of the chief benefactors in the single market is the
finance sector and hence Brexit can bring finance industry to a dilapidated condition.
It has been argued that leaving EU will lead to cost saving as U.K will no longer be a part of the
EU budget. Moreover further argument was also been forwarded that although it has been said
that Britain will lose trade along with its neighbor’s, however the country will be free to establish
its own agreements of Trade (independent.co.uk,2018).
Figure1: EU Capital markets handled mostly by U.K
(Source: independent.co.uk, 2018)
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Conclusion
The discussion has show how Brexit have both negative and positive impact on the businesses of
each sector but as per the opinions given by scholars and different journals, Brexit has created so
much of uncertainty all across the trades inside and outside U.K. There have been no negotiation
related to future relation between EU and U.K and both the sides are being hopeful tooutline
their futre relations related to trade travel as well as security. If the situation remains under
control the exit day will be as said earlier on 29th March 2019.
The U.K government and the opposition party are hopeful that Brexit will happen although some
groups still hope to withhold Brexit. In the trance of all this it is significant to understand the
relation between Britain with EU and if this relationship can be safeguarded in future.
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Reference List
da Costa Cabral, N., Gonçalves, J.R. and Rodrigues, N.C. eds., 2017. After Brexit: Consequences
for the European Union. Springer.
Dhingra, S., Ottaviano, G.I., Sampson, T. and Reenen, J.V., 2016. The consequences of Brexit
for UK trade and living standards.
Hobolt, S.B., 2016. The Brexit vote: a divided nation, a divided continent. Journal of European
Public Policy, 23(9), pp.1259-1277.
independent.co.uk. (2018). Cost of Brexit: The impact on business and the economy in ....
[online] Available at: https://www.independent.co.uk/news/business/news/brexit-economy-
sterling-currency-investment-cost-impact-business-financial-banks-insurance-retail-
a7695486.html[ [Accessed 2018].
Kuznetsova, M.A. and Khakhalkina, E., 2018. THE PROCESSES OF TRANSFORMATION OF
BRITAIN'S NATIONAL IDENTITY IN THE CONTEXT OF BREXIT. VESTNIK
TOMSKOGO GOSUDARSTVENNOGO UNIVERSITETA ISTORIYA-TOMSK STATE
UNIVERSITY JOURNAL OF HISTORY, 53, pp.52-58.
Miethe, J. and Pothier, D., 2016. Brexit: What's at Stake for the Financial Sector?. DIW
Economic Bulletin, 6(31), pp.364-372.
Moloney, N., 2017. Financial services, the EU, and Brexit: an uncertain future for the
city?. German Law Journal, 17, pp.75-82.
Watson, D., Yap, S., Pandi, S., Husband, J. and Tekelas, F., 2018. BREXIT and the Implications
of Food Safety Cultural Compliance in the Food Manufacturing Sector. Acta Scientific
Microbiology, 1(4).
White, K., 2017. Plotting the middle ground: Identifying post-Brexit environmental policies that
encourage the adoption of sustainable practices whilst increasing the profitability of MNEs
within the car industry.
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