The Economic Impact of Brexit: Challenges and Opportunities for the UK

This essay provides a comprehensive analysis of the economic impact of Brexit on the United Kingdom. It begins with an introduction defining economic issues and highlighting the importance of addressing them, particularly in the context of Brexit. The main body of the essay delves into the ways in which Brexit has affected the UK economy, including reductions in per capita income, impacts on trade, foreign direct investment (FDI), and productivity. It examines the role of the UK government in navigating the economic challenges posed by Brexit, including legislative changes, negotiations, and the development of new policies. The essay also explores how Brexit has impacted the business environment, including changes in taxes, duties, safety standards, and the movement of goods and people. The conclusion summarizes the key findings, emphasizing the multifaceted challenges and opportunities Brexit presents for the UK economy and the need for ongoing government adjustments to mitigate negative impacts and foster growth. The essay utilizes several academic references to support its analysis.

BUSINESS ECONOMICS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Economic issues can be defined a problem in economy because of which money, trade,
industries of a country are impacted (Gudgin and et. al., 2018). It is extremely important for a
country to focus upon identifying and resolving economic issues that can reduce overall growth
rate of a country. there are various kinds of economic issues that can impact a country in both
positive and negative. Topical economic issue chosen for this essay is Economic impact of
Brexit on United Kingdom.
MAIN BODY
Overview of ways in which Brexit event has affect overall economy of UK
Brexit is a short for of Britain exit from European Union. In January 31, 2020 UK left
European Union. Event of Brexit is one of the major and most important economic issue that has
impacted UK drastically in many different ways both positively and negatively. one of the major
and most important impact of Brexit was that it reduced overall per capital income of UK. Due to
this economic issue UK has suffered loss in per capita GDP. Its negative impact on
unemployment was quite less but it has directly increased inflation rate of country (Tetlow and
Stojanovic, 2018). There are many other kinds of economic impacts of Brexit that has impacted
UK but majorly it has impacted trade (including both import and export), FDI (Foreign direct
investment), and productivity that focuses upon GDP per head. It has been observed that being a
member of EU provided more than 73 percent of gain in terms of trade. Leaving EU directly
impacted in reduction of trade both in terms of import and export. Due to this loss of trade
productivity of directly impacted. It has been analysed that if past 15 years overall GDP has lost
by approximately 7 percent. If FDI is measured in terms of money then exit from EU has result
in loss of 22 percent of FDI. If immediate impact of Brexit on economy of Uk is seen then its
inflation rate has increased, national income of UK has decreased by approximately 1.5 percent.
Due to Brexit overall performance of various organizations that operated globally and had
offices in all over Europe. their business has also been impacted due to this Brexit economic
issue. Most of the companies again have to focused upon bringing changes within their business
strategies, plan, update their policies etc. as per the current scenario. As a result of Brexit many
organizations had shifted assets, offices, or businesses operations out of Britain in order to retail
their operations in other countries of Europe because of which financial condition of UK had got
disturbed because as per the statistics more than US $ 1 trillion were transferred out of UK and
1

many insurance companies also transferred US $ 130 billion out of UK (Portes and Forte, 2017).
This movement of companies was another factor because of which overall economy of UK was
impacted in a negative manner. it has already been identified that Brexit has impacted trade in
negative manner. even Monetary and Fiscal Policy can do nothing in managing loss in trade as a
result of Brexit and decline in productivity can also not be managed.
Role of government in Brexit economic arena
Government played a vital role in this economic event of Brexit. Leaving EU has
certainly resulted in bringing changes within regulations, legislation. It also impacted public
services in both positive and negative manner. first task that government did after taking decision
of leaving Britain was to trigger Article 50 by formally declaring their main intention of leaving
European Union (Belke and Gros, 2017). This was passed by parliament and after long
negotiation final package of leaving EU was decided. Due to Brexit parliament of UK has to face
various kinds of challenges. Government of UK had to make various kinds of negotiations and
amendments. These negotiations are extremely important for government or parliament of UK in
order to make and develop a stable and successful government. In order to successfully exit from
European Union, it was important for government of UK to coordinate parliamentary work
securely, and coordinate with both the houses of Commons and the Lords. In order to make
Brexit successful parliament had also focused upon developing a joint committee of Commons
and Lords Committee on Brexit. Government had to identify all kinds of challenges that they can
face in terms of Brexit and develop required legislation for the same.
If overall impact of Brexit is analysed that it was identified that overall spending or
expenditure of government has increased and due to reduction in source of income, migration of
many large firms from UK had negatively impacted UK and had also increased various kinds of
challenges for government for the same (Begg and Mushövel, 2016). Many forecasts clearly
state that Brexit will impact overall income and spending of government. Even if UK no longer
had to pay to EU still, they will face difficulty in management of their expenditure as they will
be having less amount of money to spend. In order to reduce its negative impact upon
government, government of UK had to take various kinds of major steps so that overall economy
of country can be can be stimulated and overall growth rate of the country can also be enhanced
that has fallen by 7 percent which the lowest it is measured by growth rate of UK in past 15
years. In order to maintain spending and expenditure government need to focus upon enhancing
2

export from UK to other countries so that overall national income of UK can be increased
(Gudgin and et. al., 2017). So, it can be said that government plays a vital and important role in
Brexit economic issue. Government needs to focus upon enhancing or boosting local business so
that exporting can be increased and more revenue or income can be generated. Increase in export
will help UK in strengthening their GDP or economic growth rate in a positive manner.
government can focus upon bringing changes within current regulations, policies, legislations
and introduce new legislations so that changes faced by government.
Ways in which Brexit has impacted business environment
It has been analysed that Brexit has already impacted business and business environment
in both positive and negative manner. it has impacted both people and business of UK. Business
always gets impacted due to changes within a country’s legislation and policies. Brexit event has
brought various kinds of changes within legislation, regulations, policies and many more due to
which business environment is directly impacted (Busch and Matthes, 2016). Due to Brexit
business environment of organizations have changes in many ways such as: in terms of taxes and
duty, safety standards, personal data, movement of goods as well as movement of people
(employees) has also been impacted. Brexit has become one of the main reasons because of
which various kinds of transition within business has occurred. Due to this economic issues’
custom duties and many other kinds of taxes have also changed because of which importing raw
materials or required goods from other countries has changed because of which overall cost of
products and services of organizations has also been impacted. Due to this issue, product safety,
economic compliances including packaging labelling has also been changed. But most
importantly working environment of organizations have changed in many ways. due to this issue,
most of the organizations operating in most of the countries of EU need to transfer personal data
between EU to UK because of which organizations are facing many difficulties.
Brexit has resulted in changes in rules and regulations of business. Majority of rules and
regulations have changed. In order to operate in UK they need to follow new government
regulations of UK because of which most of the organizations have faced difficulties in
operability (Busch and Matthes, 2016). Exit of Britain has forced organizations to bring changes
within their recruitment and selection process and transferring of employees within Europe
process. Brexit resulted in increasing uncertainties in business environment because of which
most of the organizations preferred to leave or migrate their business from UK to other European
3

countries like Paris etc. Organizations operating in UK also faced other issues like rise in unit
costs, labour costs, and financing costs because of which revenue and profitability of
organizations were expected to reduce and operability cost were expected to increased because
of which business of most of the organizations were getting impacted.
CONCLUSION
From the above report it has been identified that Brexit is one of the main topical economic
problem of UK that has impacted overall economy of UK, business environment of organizations
operating in UK in many different ways. Exit of Britain from EU has increased various kinds of
difficulties for government and raised many challenges for them such as it has reduced source of
income and increased expenditure for government. In order to overcome those issues, parliament
or government need to bring various kinds of changes within their legislation, regulations in a
proper manner.
4

REFERENCES
Books and Journals
Begg, I. and Mushövel, F., 2016. The economic impact of Brexit: jobs, growth and the public
finances.
Belke, A. and Gros, D., 2017. The economic impact of Brexit: Evidence from modelling free
trade agreements. Atlantic Economic Journal. 45(3). pp.317-331.
Busch, B. and Matthes, J., 2016. Brexit-the economic impact: A meta-analysis (No. 10/2016).
IW-Report.
Gudgin, G., and et. al., 2017. The role of gravity models in estimating the economic impact of
Brexit. Centre for Business Research, University of Cambridge.
Gudgin, G., and et. al., 2018. The macro-economic impact of Brexit: using the CBR macro-
economic model of the UK economy (UKMOD). Journal of Self-Governance and
Management Economics. 6(2). pp.7-49.
Portes, J. and Forte, G., 2017. The economic impact of Brexit-induced reductions in
migration. Oxford Review of Economic Policy. 33(suppl_1). pp.S31-S44.
Tetlow, G. and Stojanovic, A., 2018. Understanding the economic impact of Brexit. Institute for
government, pp.2-76.
5