Changes to the External Environment for UK Businesses Post-Brexit

This essay critically evaluates the possible changes to the external environment in which UK international businesses operate after Brexit. It discusses the uncertainties, opportunities, and challenges that Brexit presents, including additional business costs, administrative burdens, and the loss of access to the European single market. The essay also examines the influence of economic, legal, cultural, and market forces on the business environment. It further explores the impact of Brexit on trade policies, foreign direct investment, and unemployment rates in the UK. The analysis considers both the negative and positive effects of Brexit on the UK's external business environment, including the potential for new trade policies and markets. The essay concludes by highlighting the direct impact of political decisions, such as the Brexit vote, on the economic performance of UK businesses and the overall economy.

FUNDAMENTALS OF ECONOMICS
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Essentially, the Brexit vote was a first step for the United Kingdom to leave the
European Union. The move to exit the European Union has created uncertainties, opportunities
and challenges for the UK international businesses such as additional business costs (tariffs and
customs) and administrative bureaucracies. The Brexit move is going to cost international UK
firms free access to single market and other benefits therein. In addition, the UK economic
performance has declined and the likelihood of UK based businesses to forge new market
arrangements and penetrate new markets will slow down the growth of business and job cuts due
to the transitioning from the Union. Undoubtedly, the business environment is influenced by
economic, legal, cultural, economic and market forces. All these factors play an important role to
ensure the proper functioning of the business environment.
After the exit, UK international business will no longer have free access to the largest
European single market which could mean temporary loss of revenue, jobs as the international
firms strive to forge new trade partnerships (Cadman & Tetlow 2017).In addition, lack of free
access to the European Union market means that the International firms of the United Kingdom
will have to fulfill new administrative and legal requirements of the countries where they aim to
set up foreign businesses. This could be time consuming and expensive as compared to its
previous operations under the Union. The fact that the European Union market was the highest
recipient of the UK’s Export volume due to the available and expansive market will reduce the
revenue income for a while(Chu 2017).For the UK international firms they will need to incur
additional costs in terms of fresh licensing, taxation with new business partnerships.
In addition, international UK firms are likely to lay off some of their workers due to low
business cycle following the announcement. The vote has raised business investor confidence
issues thereby diminishing the hopes of other countries merging or expanding their businesses

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with UK based international firms. Due to the low demand and anti-competitiveness of UK firms
due to the exit announcement, international firms are likely to cut down on production due to the
high inflation rates, market uncertainty, and additional costs of operations due to tariffs and
customs and worker layoffs. International UK businesses will have to incur additional costs in
possible registration, licensing fees, taxation while trading with European Union member states
and Non –European member states. Under the EU, there was reduced costs of doing business due
to the economic incentives put in place by the European Union.
Source: Chu 2017
Further, the UK business environment will operate under new trade policies and
legislations after March 2019 due to the fact that they are no longer European Union Subjects
thus the need to chart their own policy and trade legislation. In addition, International UK
businesses will have to renegotiate their trade dealings with members of the European Union
(Malaket 2016).This renegotiation is premised on the fact that the United Kingdom is no longer a

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member of the European Union as of March 2019.Under the European Union, United Kingdom
Multinationals and transnational corporations enjoy free access to the international single market.
However ,following its ouster,UK firms will have to renegotiate their dealings and incur tariffs,
customs and other administrative, bureaucratic laws that apply to non –member states of the
European Union.
Following the Brexit vote, has been drastic changes in the performance of the UK
business and the economy. Owing to the opting out of the Union, UK business sourcing raw
materials from the European union countries or other countries will incur additional costs due to
that fact that
tariffs and customs will be applied(Market inspector 2017).Also, this additional costs will make
the UK export products less competitive for the international market .In a bid to boost their
profit margins, international UK businesses are likely to lower the prices for goods and services
to stay aloft which isn’t good for business. Low pricing will lead to reduced revenue which is not
good for Businesses. Due to the vote, there is uncertainty as to the future of trading relationships
of the UK. Getting out of the Eu has led to loss of confidence in the economic stability of the UK
thus leading to migration of skilled labor, withdrawal of foreign direct investment and
uncertainty of forging new trading relationship out of the European Union (Giles 2016).
In addition, the UK leaving the EU has cost it revenue, loss of market and confidence
with potential foreign direct investment which might lead to reduced government and
international business revenue, job cuts due to the transition period of forging new trade
relations. European Union member states firms are likely to ditch UK suppliers (Inman 2017).In
the event that UK international firms are unable to access EU markets, there is going to be
massive revenue loss for the firms. In addition, international UK firms might have to lay off

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some of their workers due to low production influenced by low demand for their products after
losing the Eu market. To maintain their Profits, UK profits might have to minimize their labor
force thus contributing to the high unemployment rates in the country. The percentage of foreign
direct investment in other countries by the UK international firms has reduced (Dhingira et.al
2017).
Owing to the economic uncertainties, the high inflation rate and the depreciation of the
pound exchange rates are likely to hamper potential foreign investors in the UK. Also, due to the
slow economic growth rate after the vote, multinationals and transnationals are likely to
struggling with keeping their business afloat following cancellation of contracts and investment
withdrawals from other investors. Further, owing to the reduced investor confidence, most
countries are likely not to take on UK international firms as part of their foreign direct
investment partner’s .Currently, the United Kingdom economy is not as vibrant as it was under
the Union thus limiting their foreign direct investment opportunities in other countries ((Wilson
2002).Also, UK companies are not considered as competitive as before the Brexit vote thus the
need for more advertisement by international UK firms.
Also, unemployment rates are likely to rise in the United Kingdom following the vote
(Savage 2018).Specifically, 58 percent of manufacturing firms are planning to lay off their
employees. This might include international firms which deal in manufacturing. The layoffs are
definitely not good for the United Kingdom economy due to the fact that it will contribute to the
already high unemployment rate in the country. Moreover, due to the move, skilled labor force
who are members of the European Union are likely to migrate back to their countries thereby
creating an employment gap in UK international firms(Inman 20180.Also ,the uncertain future of
the UK following the vote, has created confidence issues which has hampered investment

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prospects and cancellation of existing contractual dealings thus leading to high unemployment
rates and loss of revenue for UK firms operating within and outside the United Kingdom.
Overall, the Vote is casting negative and positive effects on the external business
environment of the United Kingdom. The investor confidence has been lowered, UK firm
products are not in high demand and competitive as they were prior to the annunciation of the
move to leave the European Union. The economic growth rate of Britain has slightly declined
owing to the Inflation, possible market losses, low demand for UK based products, migration of
skilled labor from the United Kingdom among other factors thereby making UK firms
unattractive for business which is a bad thing for the UK economy. However, the exit is likely to
inspire new trade policies for UK firms and newer markets (Inman 2017).
Inevitably, politics has a direct bearing on the business and economic performance. The
Brexit vote, was a political decision. However, its effects have spilt over to the Economic
performance of UK firms and its economy( United Kingdom :Political and economic outline
n.d.)Following the announcement of the vote tearing the United Kingdom from the European
Union, the value of the pound has gone down and the value of stocks are falling (Brinded
2016).Politics guarantees peace which is essential to the conduct of business. In additions,
politics plays an important role in the forging of forming foreign trade agreements. Following the
exit of the UK from the EU, the possibilities of the UK working closely with the EU on
economic matters is likely to be shaky as contrasted with before the fallout (Boffer & Ranking
2018).This goes to show that the political decisions impacts on the economic activities.
Following the Brexit talks, the consumption and investment levels in the United
Kingdom has been adversely affected (United Kingdom: Economic….n.d).The future
uncertainties led to the depreciation of the pound thus contributing to the relatively high inflation

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rate in the country thus the assertion that political decisions directly impact on the economic
activity and performance of a country. Regarding economic growth rate, the United Kingdom is
experiencing a decline following the Brexit vote (Partingdon 2018).In addition, there is an
increase in the unemployment rate in the country. The slow economic growth rate might be
explained by the economic uncertainty for the UK businesses due to less foreign investment,
migration of skilled workers who belong to the European Union member states among other
reasons. Economically, the demand for UK products has gone down due to the uncertainties
facing the Country.
Predominantly market forces directly impact the operation of business. Essentially
market forces imply those factors that directly impact the price or demand or availability of
goods and services. There is UK government involvement in its economy. The UK economy has
domestic regulatory framework and until March 2019, the European Union policies such as the
Common agricultural Policy still applies .European Union policies apply to all member states but
since the United Kingdom is leaving the Union, It will have to formulate and implement new
policies and legislation to govern international trade. Owing to inflation in the UK, the prices of
goods are relatively high thus more revenue for the firms but adverse to consumer welfare. Also
the supply of goods has been affected by the high production cost and the lack of business
confidence thus limited supply of goods for exportation.
Regulatory frameworks in the form of legislations, directive and guidelines are very vital
to any business environment due to the role they play. For most economies, there are regulatory
bodies and legislations which are meet to guide the operations of the different industries in the
economy (Cumming & Zahra 2016).Such legislation and requirements give rise to the legal
environment in which business take place. Legal environment makes provision for business

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property protection (‘The importance of rule of law….2012).In addition, businesses are subject
to licensing requirements which are a way of regulating business operations. Through
licensing,goverenments are able to raise revenue and control businesses operations .The
importance of a legal framework to the business sector is to boost competition through
criminalizing and prohibiting anti-competitive behavior such as monopolies, collusive and
exclusive dealing.
Predominantly, culture has influenced the way business is done in different parts of the
world (Wilson 2002).For Britain, it enjoys a deep and unique roman empire and industrial
revolution which has created business opportunities for it through tourism, industrialization and
transportation thus confirming the importance of culture to business relations and dealings. There
is a huge cultural impact in the way the Chinese do business which is distinct to the way the
Americans do their business. To the Chinese and the America way of businesses, there are
different meanings to non-verbal cues, hierarchy, organizational structure which all influence
business negotiations and dealings (Liao 2016).Undoubtedly, culture plays a critical role in
business relations .Through traditional medical practices, the field of natural and traditional
medicine has developed and is a globalized affair thus the assertion that culture can form part of
the business environment. In addition, different cultures are global tourist attraction due to their
unique ways of doing things.
Conclusively, the Brexit vote impact on the UK’s economy has its share of positives and
negatives. Primarily, the UK economy performance has been adversely affected by the
announcement but there is hope for economic recovery. Loss of business confidence, additional
costs of doing business, new bureaucracies ,depreciation of the pound are some of the challenges
facing the external business environment of the United Kingdom. However, all is not lost. The

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United Kingdom now has the free will to penetrate new markets, formulate its own trade policy
which will be good for the economy. All in all, the United Kingdom economy is likely to rise
economically due to its free will and potential in global economy.
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