Brexit's Impact on the UK Economy: A Comprehensive Analysis

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BUSINESS ISSUES

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Table of contents
INTRODUCTION…………………….................................................................
.........3
BRIEF HISTORY OF
EU……………………………………………………………………………4
CHALLEGNGES……………………………………………………………………………
…………..5
CONCLUSION………………………………………………………………………………
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REFERENCES………………………………………………………………………………
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INTRODUCTION
This assignment covers a series of negotiation between the UK and the
EU, following a referendum in the UK. It also covers the potential impact
of Brexit on the economy of the UK. This study is done with the use of
relevant data and statistics available from diverse sources.

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BRIEF HISTORY OF EU
The European Union is a geopolitical entity, came into being post-world
war second. According to the then head of the government Winston
Churchill, "it is United States of Europe”. It has undergone several
changes and treaties (from ESTEC to EASC) with the change in political,
economic and cultural changes in Europe but the Maastricht treaty of
1992 gave it its final shape. This created the euro as a single currency
for the member states of the European Union (EU, 2019).
Though, the formation of the EU has led economic growth opportunities
to its member states. It has also created some dilemmas in the member
states post-Greece crisis and like situations. It gave Britain a reason to
leave it that is also supported by the British population with 51.9%. So, in
the year 2017 Government of Britain has invoked article 50. Left-wing
and right-wing both supported Brexit (Wright, 2016).

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CHALLENGES FACING THE UK AS A MEMBER OF EU
A challenge faced by Britain due to its exit from the economic union of
the European nation which later converted into to political union and has
a single currency and single visa provision has affected the economy of
the country in the short run. This has thrown several challenges for the
economy of Britain and these are illustrated below. The factors affected
the political, economic and social scenario in the country. The challenges
are: (The Economist, 2019).
ECONOMIC
Devaluation: Devaluation of the pound sterling has increased the price
of imports of goods and services. It reduced the profit earned by business
units in Britain. It also gave rise to domestic inflation in Britain.
Devaluation of the currency can be controlled with the use of specific
measure but the government has felt that these fluctuations in the
currency are temporary and it will improve over times and domestic
currency again become strong with the other currencies (Wright, 2016).
The decline in capital flow: due to the political instability and
numerous other reasons, the flow of capital is shirked. It has created a
cash crunch in the market for the business units. There are many factors
responsible for the decline in the capital flow i.e., as per the IMF, any
country attracts investment only if there is political stability and economy
is present. Earlier, the rule of the EU to enter and do business prevailed
and these rules helped the business units in setting up their business
with the ease (Pollitt, 2108).
Cost-push inflation: inflation due to push in the cost of manufacturing
and production has increased the prices of utilities. Britain is a member
of the EU used to receive raw material at lower prices and could keep the
prices of the products under control. But now the situation has changed
and as the prices. The rise in the cost is that earlier EU norms has
facilitated the easy access to the raw material for the manufacturing
sector and there was no or minimum duty on that makes the cost of the

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product low but now this benefit is not in place and this considered as
one of the major factors for the low growth of manufacturing sector post-
Brexit (Roos et al., 2016).
Current account deficit: the deficit is the negative difference between
the income earned and expenditure. This is increasing for Britain as it is
being a member of EU has traded with trade associations like WTO,
Common Wealth etc. on the norms of EU and earned profit by now,
Britain is struggling to design its policies for trading with other nations
(EU, 2019).
Budget deficit: BD is the difference between federal expenditure and
revenue. Though the deficit budget is good for the long term it creates
some short term disadvantages for the business units. It also gave rise to
a shortage.
Internal stability of British politics in light of Brexit is another major
consequence of the Brexit. Devolution of power and governance
challenges is there and they will impact the stability in the different
regions. As per the EODB index of the World Bank, economic, political
and societal stability of the region is must for enabling work

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environment. But the reason to leave the EU has a direct impact on all
these factors. The rights of the citizen post Brexit: the EU guarantees to
the equal right to its citizens in the EU. But Brexit has a direct impact on
the rights of citizens and created interregional disparity (Market
Inspector, 2019).
POLITICAL IMPACT
Britain's decision to leave the EU also has an impact on the other nations
like Wales, Scotland and Ireland. Trade is interlinked activity and each
nation due to globalization is directly and indirectly connected with the
other nation in the form of import or exports etc. this interlinking of the
business units affects the whole region somehow. The list of challenges is
the reasons for reducing investment by new business units in Britain
(Pollitt, 2108).
As the data indicates the factors affecting that business issues and are
assessed before investing. Business units emphasized the political
stability of the region as the rules, regulations and an order of the
government has a direct bearing on the business. The relationship
between the British government and other nations also affect the doing
of business. For instance, the political tussle between the British and
Qatar has the potential to affect the working of Sainsbury. This also
affects the investment by the sovereign wealth fund of Qatar in the
Sainsbury (The Guardian, 2019).
Politics of Britain was under the question by various economists as they
that this withdrawal of the Brexit from the EU will only affect the
economy in the long run and will not yield any positive result for it. The
downfall in the Pound was 7%, 5% and 1 % respectively as compared
with the American dollar. Many investors at this time have decided to
withdraw their investments due to foreseeing losses to their business.

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Many other countries are also affected by the Brexit. The political
scenario in Spain is also getting affected and there were also demands
from the other region for the withdrawal. Catalonian also felt that they
should focus more on their aspirations and development (Ross, 2018).
EU has several advantages to offer, for instance, countries do not need to
maintain separate ties with the other nations for merchandise. They can
do it with EU membership. There was also no charge and minimum taxes
on the land, labour and capital. The reason for the British People to leave
the EU is that: they felt the economy is not working properly due to the
Brexit and it has to create discrimination for the economy of the nation.
This issue needs to be resolved and they felt the Brexit is the solution for
their problem (Pollitt, 2108).
Challenges for the other nations
In the line of Britain the other countries like Italy, Greece etc. has also
felt the economic opportunities offered by the EU are limited and partial.
These are only improving the status of a few nations. The reason to leave
the EU by these nations is that they feel there is discrimination. Though
the crisis was there the demands could not materialize.
The economy of any nation is at worst hit if such big changes take place.
Britain's choice to leave the EU also influences the other nations like
Wales, Scotland and Ireland. Ireland has after some political discussion
has decided that it will keep its membership with the EU and will not
leave the UK also (Telegraph, 2019).
Due to the globalization Trade has become an interlinked activity for
each nation or economic unit. Each nation due to globalization is directly
and indirectly associated with the other nation in the form of import or
exports etc. this intertwining of the business units affects the whole
region somehow. The impact on the trade and the profitability of the
business is affecting the business profitability. The list of challenges is

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the reasons for the dipping venture by new business units in Britain (EU,
2019).
Earlier the startup business units were at the worst hit due to Brexit. The
startup business finds following the rules of government and the strict
regulation difficult and hurdle in the growth and development of their
business. This has also affected any new investment by any new company
in the nation. Citizenship was also a widely discussed issue in Britain
(Böckli et al., 2017).
The rights of the nationals post-Brexit were widely discussed. This has
also led to trouble in other countries. The internal steadiness of British
politics in light of Brexit is another major Challenge of the Brexit.
Devolution of power and governance challenges is there and they will
impact the stability in the different regions. As per the EODB index of the
World Bank, the financial, political and social steadiness of the area is a
must for enabling work environment. But the motive to leave the EU has
a straight impact on all these factors. The rights of the citizen post
Brexit: the EU assurances to equal right to its people in the EU. But

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Brexit has a direct impact on the privileges of citizens and created
interregional disparity (Market Inspector, 2019).
The economic challenges faced by the small business units area lack of
effective policies to support the growth of the business, cash crunch in
the market, or fluctuating interest rates and lack of economic incentives
by the government. People were very disappointed with the decision of
the government to leave the EU and they considered that it will lead to
haphazard for the economy and make the situations unmanageable (The
Economist, 2019).
Inflation has increased the prices of utilities and the food product. Britain
is a member of the EU used to receive raw material at inferior prices and
still maintained quality standards. There are several measures taken by
the government to keep the prices of the products under control. But
now the situation has changed and as the prices of the products are
under control and they can be used for the advantage of the organization.
The challenges faced by society
The society has faced several changes as the change in the norms by the
government has impacted the labor market and the productivity in the
UK. More than 10% of people lost their jo0bs and it has reduced the
purchasing power of the people substantially.
It has also created chaos in the society and the rising rate of
unemployment has created dissatisfaction among the population for the
political regime. To summarize all these factors it can be said that Brexit
initially has created lots of trouble for the business units in the UK and
also created many problems for doing business. It also becomes difficult
for the business units to get their properties registered with the federal
units for doing business. It is also crucial to keep the present business
working at the same pace. In the absence of the cash, it becomes difficult
for the business units to expand their business. It also affects the
employment rate and generation of employment for the business (Böckli
et al., 2017).

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There are many new challenges faced by the business unit for the
expansion of their business units. Employment generation is also needed
to improve the economic position of the business. Cash support and
reduction in inflation is also crucial to keep the business growing. The
policies launched by the government should also support the growth of
the business. The environment for the business units should be enabling
and not the one that makes it difficult for the business units to survive
and achieve the growth of the business units (The Economist, 2019).

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CONCLUSION
This assignment has covered the range of challenges faced by the
business unit in the UK post Brexit along with a brief overview of the EU.
It also covers the potential impact of Brexit on the economy of the UK.
This study is done with the use of relevant data and statistics available
from diverse sources.