Analysis of Brexit's Impact on UK Trade and Investment

This report provides a detailed analysis of the impact of Brexit on the UK economy, focusing on trade, investment, and the creative industries. It begins by examining key trends in the trade of goods and services between the UK and Commonwealth countries, highlighting the significant role of the UK in global trade and the potential effects of Brexit on these relationships. The report then delves into the specific impact of Brexit on the creative industry sector in the UK, discussing challenges such as funding, workforce issues, and additional costs. Finally, it explores the challenges and opportunities faced by multinational companies in London in the context of Brexit, considering factors such as supply chains, regulations, and economic priorities. The report uses charts and graphs to illustrate trade data and trends. Overall, the report offers insights into the complex and multifaceted consequences of Brexit on the UK's economic landscape and various sectors, making it a valuable resource for students studying economics and related fields. The report also includes an introduction, conclusion and a list of references.

BREXIT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASKS.............................................................................................................................................1
1. An explanation on key trends on trade of goods and services between commonwealth
countries......................................................................................................................................1
2. Explanation on impact of Brexit on trade and investment for creative industry sector in UK
.....................................................................................................................................................6
3. Challenges and opportunities for multinational companies of London with the implication
of Brexit......................................................................................................................................9
CONCLUSION .............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
There is a strong linkage between commonwealth countries and UK. It is so because
many commonwealth countries are heavily depends on market of UK economy. Commonwealth
countries are known as developing countries which export material from UK market. This report
will present the information which is related to key trends of goods and services between
commonwealth countries. Further, in this report explanation is provided on the impact of Brexit
on trade and investment within creative industries sectors of UK. At last in this report, critical
evaluation is provided on impact of post-Brexit for multinational companies in London.
TASKS
1. An explanation on key trends on trade of goods and services between commonwealth
countries
In the world of economics UK is the major player in world trade. Therefore, link of trade
is strong between UK and commonwealth countries. Accordingly, UK is known for the fourth
largest market which doing global trading and their flow of goods and services in market
economy is US$1.6 trillion which known as almost 4% to trade across the world (Hix, 2018).
For UK, most important trading is EU which also has its contribution in trading and which is half
of overall trade of UK. Majorly affected country with the decision of Brexit is European Union.
Their overall trade of goods and services majorly affected with comparison to UK.
From past few years, this linkage between UK and commonwealth countries is constant,
that is from US$57 billion in 2000 to US$91 billion in 2015. Therefore, in this report Brexit is
considered for developing countries who trade goods and services with UK. UK is the known for
large exporter of sugar, which buys 80% of sugar and import from Belize and 70% from Fiji. UK
has decided to leave European Union, therefore it is the opportunity for government of country to
discuss their trade point of view in post-Brexit world. The immediate challenge on the world
economy is uncertain (Dhingra, Freeman and Mavroeidi, 2018). There may be high degree of
speculation to shape future trade for UK and EU. Many business organisations will have to
change their policies and operation model for Brexit because there will a major impact on factors
like supply chain market, current compliance regulations, existing approvals etc
1

UK has strong trade relationship with Australia, Canada and India, therefore this is the
opportunity for them to develop more strong relationship with this countries in post-Brexit
world. Chart which shows import and export of UK from EU and from rest of the world.
From the above graph it is resulted that commonwealth countries plays a small part of
contribution in UK trade. In 2015, there is only 9% of total trade in UK by commonwealth
countries as compared to EU which is 44%. From 1999 to 2010, there is a better growth of
export between commonwealth countries and UK. But now the trend got reserved and its overall
export from commonwealth countries will get decline in 2013 and fell by £25.1 billion in 2015.
In 1999, services of UK export was almost triple that is £8.5 billion and increase with the
£22 billion in 2010 which again increases in 2015 with £22.3 billion (Brown, Liñares-Zegarra
and Wilson, 2018). Therefore, a graph which shows it trends throughout given year is as
follows-
2
Illustration 1: UK import and export
( source: Commonwealth trade in focus as UK prepares for Brexit, 2017)

another chart which shows UK trade balance with commonwealth countries, 2015 in
which complete view of world trade follows-
3
Illustration 2: trade of goods and services in UK with commonwealth countries
( source: Commonwealth trade in focus as UK prepares for Brexit, 2017)

From above graph it is shown that UK exported £8.6 billion of goods and services to
Australia in 2015 and because of this, tourism relationship between UK and Australia has
increases. India is also the key trading partner of UK in terms of import which is because of rise
off-shoring and outsourcing in trading of goods and services.
Its effects on consumers will be both positive or negative. With the implication of Brexit,
there may be possibility that cost which incurred with movement of goods and services will get
increases between UK ans EU (Dhingra and et.al., 2018). This is all because of the tariff plan
and burden of this cost associated with tariff will pass on to consumer which either provides
4

positive impact or negative impact on overall profitability of the company. Supply chain will
also get affected for the companies who has its business worldwide because of this impact
consumer goods movement will take place through existing supply chains.
VUCA is the new example of Brexit which is used to describe the status of business
environment in today's world. VUCA stands for Volatility, uncertainty, complexity and
ambiguity. Volatility is the high rate of exchange where change in nature, speed and volume will
not be accepted as predictable pattern. After Brexit, those people who living in UK by their
personal choice will not work with occurrence of Brexit (Fingleton, 2018). Therefore, VUCA has
the impact on global mobility in which more people agreed that they have now resources to face
the challenges of VUCA environment. Global impact of Brexit is that it is the new flight for
safety included for the safe development of markets between countries. Overall result is that it
will lower market interest rate and will raise currency values.
The immediate challenge on the world economy is uncertain. There may be high degree
of speculation to shape future trade for UK and EU. Many business organisations will have to
change their policies and operation model for Brexit because there will a major impact on factors
like supply chain market, current compliance regulations, existing approvals etc. therefore, on
UK impact of Brexit will be better and far more flexible in which there will be fewer demands
and less red lines in comparison with EU.
After the development of Brexit, position of UK as trade partner will difficult to
determine. Impact of Brexit will be on the economic priorities which overall helps in the
development of new trade policies (Gudgin and et.al., 2018). This also helps UK economy to
deal better than EU for trade of goods and services with commonwealth countries. It also
provides positive impact on production of goods and services which is in accordance to develop
better quality of products with the term's government.
After the post-Brexit, many companies has announced to shift their business to other
locations because outcomes will depend on the negotiations of Brexit. This is the policy which
provides a positive impact on trade market of UK, which means that those countries who trade
with EU will develop similar relationship with UK. This overall leads to decrease any possible
disruptions. This shift of companies will also create negative impact on the economy where
many peoples have to lose with their jobs and many companies will have to shift their business
5

policies to operate effective business operation in the economy. Brexit will majorly affect
companies who are engaged in doing business of import and export which is between
commonwealth countries.
Brexit will overall lead to disrupt revenue, tariffs, customs, tax, investment, finance and
other businesses issue which affect trade implication. Organisation will have to develop policies
in accordance with Brexit for developing significant trade with EU and UK. Therefore, after the
implication of Brexit, there will be many changes which take place in doing trade of goods and
services with UK and EU.
In UK's economy 7 of the top 10 global trading partners are EU countries therefore, to
develop smooth relationship with European union, government has developed free-trade
agreements in post-Brexit environment. Therefore, Brexit claims that UK will now strongly
developed its free-trade agreement with its commonwealth countries in which they grant
concession on agricultural trade in exchange for the development of service sectors on
economies.
2. Explanation on impact of Brexit on trade and investment for creative industry sector in UK
Creative industries are playing one of the most important role on the economy of the UK.
They are the companies which is the fastest growing sectors in the economy of UK but after the
applicability of Brexit it creates better growth development for UK and less for Europe. Creative
industries comprises advertising and marketing, architecture, crafts, design, film, TV, radio, IT,
software, museums etc.
Impact of Brexit on advertising and marketing industry remains uncertain. These
companies are performing very successfully in market of UK's economy and by the implication
of Brexit, there puts a limitation of these types of companies. After this implication, European
citizens who are working under the companies of UK was most significantly hampered. This
developed a negative impact on the performance of the company where talented workers leave
company because of the implication of Brexit.
Creative industries of UK playing major role in providing employment opportunities to
society. Creative industries of UK account for 6% of employment and 5% to economic output
(Hosoe, 2018). Table which shows economic and employment output in terms of gross value
added of each sector is as follows-
6

After the implication of Brexit, many creative industries raises their voice, because there
are many talented workers who are the citizens of European nation and if they leave the company
is affected major business operation. Concerns of country was so effective which makes
government to think upon the factors. Creative industries are started freedom of movement, as
their business operations are affecting heavily with the post-Brexit.
Problems which faced by creative industries because of Brexit is as follows-
lack of jobs
Creative industries are the industry whose business is connected with the many prates of the
world. Implication of Brexit has majorly affected the business operations of creative industries
and majorly for the workers of EU where it becomes difficult for them to maintain international
work relationship with countries across the nation (Blackaby, 2018). In companies of UK, there
are almost 21% of EU members working, which means that after the implication of Brexit
thousands of peoples lose with their jobs.
Funding
7
Illustration 3: contribution of creative industries in UK
( source: Effect of UK leaving the EU on tourism and creative industries, 2018)

For creative industries like media and art industries, business operation are mainly possible
through funding. Members and bodies of Europe are majorly contributing in these types of
company by which effective work will get produced. But when Britain leave EU, funding which
done by bodies of EU will also get stopped and because of that lots of project will be
unachievable by the companies.
Additional cost
Film industries are also majorly affected with the implication of Brexit in UK. Film industries
are the one's which used lots of location of Europe. Implication of Brexit creates a negative
impact on the performance of film industry where for the development of effective set, company
have to incurred additional cost. This will overall result them with the decrease in profitability.
Promotion and distribution
Distribution which is done by the bodies of EU to film industries of UK is likely to face
significant decrease in the operation of film industries. This creates problem for film industry,
where they will not get the support of European film festivals and premieres for UK films. To
broadcast films in cinemas hall, company will charge higher price which overall affect the
customers decision. Therefore, it can be said that film industry of UK will suffer a lot because of
decline in effective advertising, awareness and sales.
Finances
With the implication of Brexit, there will high possibility that value of British Pound will also
get change. If there is a decline in the pound then, it creates an heavy impact on the production of
the creative industries. For these types of industries, budget plays an essential role to develop
effective business operation in the economy. With the implication Brexit, to manage budget will
become difficult task and company has to invest more for developing effective production in
organisations (Davies and Studnicka, 2018).
These are challenges which creative industries faced with the implications of Brexit.
Therefore, many companies have raised their voice so that business operations of company will
not get affected with separation of UK from EU.
8

3. Challenges and opportunities for multinational companies of London with the implication of
Brexit
After the implication of Brexit, business operations of multi-national companies are also
get affected. These types of companies have its business operation globally which is also in UK
and EU. Brexit, will majorly affect business operation of companies in European market and in
UK. For some multinational companies, these changes will be significant but for some
companies, these changes will create heavy impact in their business performance.
There are many things and millions of good and skilled people who are majorly depended
on the trade flows which is between UK and Europe. With the implication of Brexit,
multinational companies have to change their business strategies and also had to revise their
future strategies to develop effective business operation in Europe and UK.
After the implication of Brexit, multi-national companies are majorly trapping under
three traps that is that are waiting for the mode where they will able to develop effective business
policies to overcome with post-Brexit environment. Companies are also focusing on making
historical data which may be irrelevant. Companies are taking Brexit spillover effect such as
currencies, cost which overall affect different parts of business organisation.
Multinational companies like Nestle affected the most with the development of Brexit in
organisation (Tetlow and Stojanovic, 2018). Companies which have more sales in UK affected
the most with the implementation of Brexit in UK. Diagram which shows Brexit scenario is as
follows-
9

From the above graph, it is clearly measured, GDP rate is at its peak point when there is
no Brexit scenario but after its applicability heavy changes are occurs in the impact of GDP rate.
In comparison to 2016, conditions has too much improved in economy of UK. But when Brexit
has implemented by the UK government, it creates a heavy inflation on the economy of the
country. Majorly for multi-national companies, workers who are working under companies are
leaving because of the insecurity of loosing job.
Multinational companies which have their business operation in both European nation
and United kingdom. Risk factors which is associated with multinational company with the
implementation of Brexit are as follows-
10
Illustration 4: Brexit scenario
( source: Brexit and its Impact on the Largest FMCG companies, 2017)