Due to globalization, stronger relationships, and ties between countries, many companies have become very integrated into the global economy. There is a lot of uncertainty around what will happen now that Britain has voted to leave the European Union. Brexit may complicate business for companies that have ties with Britain. On the other hand, some companies may benefit from Brexit. Some things surely to be affected in some way by Brexit are trade, foreign direct investment, and particular industries in the UK.
Trade is one of the factors that is facing a lot of uncertainty because of Brexit. More than half of all UK trade is with the European Union, which amounts to approximately 15% of their national
income or GDP (Ottaviano, 2014). A cost of leaving the EU would be the decreased trade between the UK and EU due to the reimplementation of tariff and nontariff barriers such as regulations and border controls. In 2014, 45% of UK exports and 53% of UK imports were attributed to the European Union (ONS, 2015). This level of trade creates lower consumer prices and access to more knowledge and technology, which is beneficial to the UK economy. Therefore, a reduction in trade would be disadvantageous to consumers in the UK, because it would lower their living standards. Furthermore, companies may start wanting trade to be routed through other EU member countries rather than the UK to ensure their access to the single market and to make sure that their business continues
It has been said that in February 2014 that Britain’s goods exports were at an all-time low record of £23.5bn, this was the lowest ever since November 2010. According to the Office of National statistic (ONS). Exports to the EU also dropped by £0.3bn to £11.7bn in February 2014, while imports rose by £0.2bn. The ONS said the fall in exports was due to the lower demand for fuels, especially oil. Which (as we can see from the above data) contributes to 22% of the UK’s export
With the infamous “Brexit” vote in 2016, the United Kingdom’s (UK) separation from the European Union (EU) was only the start of the union’s eventual downfall. Upon exiting the EU, the UK also chose to leave the EU’s Single Market, causing friction for UK manufacturing firms. The Single Market Strategy removed internal borders and other regulatory obstacles between EU states in regards to trade. The function of the Single Market was to “stimulate competition and trade, improve efficiency, raise quality, and cut prices.” However, with “Brexit”, the UK lost rights to sell to into the European markets without discrimination. Huge tariffs were placed on EU imports that caused financial distress to
Despite the fact the social benefits of EU membership are often overshadowed by the economic and political aspects, the loss of these benefits would negatively impair the freedom of the UK people, and negatively impact UK businesses. The free movement of UK citizens throughout the EU to travel, to attend school, live, and retire. Businesses do not only benefit by having to follow one set of regulations, but also benefit from having a larger source of potential employees to chose from. The EU employment rate in the UK is 3.3%, while they make 4.5% of
So after the result of the referendum had been out, the first affect is the pound had fallen sharply, according to (Taub,A. 2016.) the pound is at its lowest valuation in seven years. Due to the (Hunt,A. & Wheeler,B. 2016) uncertainty rushing around, a British exit will likely result in a massive rebalancing of currencies. Investors will (and have already begun to) dive out of the British pound and into cash that's perceived as safe — the Swiss franc, the Japanese yen, the U.S. dollar. The changing direction of the investor and the fallen of the pound has spiked the value of Yen which has made Japan’s export being less competitive. Even the fallen of the pound can help the export business and attract more tourism to the country ,which due to the (bbc no name) The travel analytics firm ForwardKeys says flight bookings to the UK rose 7.1% after the vote. The import business still have to pay more for the fuel and material due to the costs which have increased 7.6%. Moreover, since 51% of goods and 45% of services of the British’s export are taken over by the EU. Losing access to the EU single market would mean less trade and less productivity growth which could (Chu,B.2016.)make
Brexit means that Britain is exiting or voted to leave EU. This can affect businesses in UK in a bad way because those businesses who are buying/importing from the countries who are part of EU will not experience the smooth process and cheap taxes/value of pounds . This is because UK will not experience the perks of being a member of EU anymore if they completely leave.
This report notes that the UK has the possibility of leaving the European Union (EU). The UK as a member of the EU has rights to get some good policies on trade. In the meanwhile, the UK also need to obligate the restrictions of businesses that published by the EU. The UK’s economic has correlation with the EU. Therefore leaving the EU (Brexit) might bring some changes on trade, employment, the regulations of businesses and the position of UK in the world. This report analyzes the positive impacts and negative impacts that might be brought to the businesses in the UK if UK decides to leave the EU.
This problem is also increased by the fact that many companies in Britain feel that a break with Europe is not in their best interests. For example,
For the money and trade, the Eurozone’s terrible economic performance bring heavy blow to Britain because European leaders did not implement the effective policies (Financial Times, 2015). Although fiscal space is adequate, the policies
Although the British voted for leaving European Union, Brexit would adversely affect the British economy in the fields of trading and foreign direct investment.
I chose this topic as it is a matter that will directly affect my future, and I’m interested in finding more about what will happen if the UK decides to leave the EU.
Exports have been affected by global events. Most importantly, “Brexit” added to fears that the European Union is unstable and other countries may follow the UK and leave the union. The EU is a major trade partner of the US and China, which could disrupt global trade. Brexit has caused major volatility in global markets as well. This could trigger consumers to stop spending and save more. Brexit also hiked up the US dollar 6.3% against the British pound. This continues the trend from last year of low exports and revenues in the manufacturing sector further impeding profits and limiting their willingness to invest.
There is no doubt that the ‘brexit’ will have a significant impact on UK, especially for the financial system. In the following few days after referendum, the financial market shows the immediate impact of ‘brexit’, the sterling exchange rate index sharply fallen by 9%, the bank equity price had fallen by 20%, the ten-year UK government bond yield had fallen by 52 basis point. In its latest financial stability report, the Bank of England had identified that the risks around the referendum on the United Kingdom’s membership of the European Union as the most significant near-term domestic risks to financial stability. (‘Financial Stability Report’ Bank of England, 30 July 2016). The following risks around referendum are considered main threaten to UK’s financial stability:
There are several ways the United Kingdom (UK) could exit the European Union (EU). Differences between a Soft and a Hard Brexit are considerable and each prospect deserves thorough investigation in order to understand how it will affect British businesses. The evolution of the EU allowed years of institutional and political transformation through the creation of the European Single Market which benefited British businesses (Medrano, 2003). However, the UK has always been reluctant to European obligations and stood out rapidly from the rest of the members by keeping their own currency. Following the Article 50, outlining the right to quit the EU, the UK citizens decided to leave in June 2016. This result caused important concerns and uncertainty especially for British businesses. In 2017 negotiations between the UK and the EU will start, however the way it will happen is still very ambiguous. British firms will be able to lobby for their favourable outcome, as they are in a position of power and could possibly influence the government in their negotiations. As firms have a strong impact on decision-makers, it is important to clarify for which outcome they should opt to protect in the best way their stakeholders during and after the transition of UK.
To what extent would the predicted impact of Brexit, on the UK economy, come true?
The Brexit is something that will cause a negative impact economically. Not only in Britain, but around the world. In Britain one element the Brexit effects their Gross Domestic Product(GDP). The UK’s per capita GDP relative to the EU founding members declined steadily from 1945 to 1972. However, it was relatively stable from 1973 to 2010. Reports from the British Treasury, The Bank of England, The IMF, The OECD, the National Institute of Economic and Social Research, PWC, Oxford economics, and the Centre of Economic Performance have all predicted a negative effect on the British Gross Domestic Product (GDP). Around 3 million jobs rely on the EU and no one knows just what will happen to them if they leave. Another point is since the Brexit referendum, Britain has fallen into sixth place for the world 's largest economy, they lost their Top AAA credit rating which means the interest rates will be higher, and the pound has fallen to a 31-year low of about 1.27 compared to what it originally was at about 1.50.