Discuss about the Economic Implications of Brexit.
Brexit is an abbreviation of Britain exit, which has been used to refer to the act of United Kingdom withdrawing from the European Union (Reid, 2016). This paper will therefore give an overview of Britain Exit is and address its impacts both positive and Negative, touching on the European Union as a whole and the exiting United Kingdom.
European Union is a political and economic partnership that that can be traced back to the world war two period. The current composition of the union after the exit of Britain is 27 countries. Brexit took place after a plebiscite conducted in June 2016 was cast in favor of the exit with 52% of the total thirty million of the population who voted casting their vote in favor of the exit while 48% voted against the exit. The idea behind the formation of European Union was enhancing economic cooperation between member countries by enabling free movements of people and goods within the member countries so that the resurgence of another war could be avoided because of the rapport that was likely to be developed.
A number of reasons were cited as the possible reasons for Brexit. Most significantly was the Britain’s Desire to broker its own trade deals with other countries who are not members of the European Union. It has been argued that currently, the benefits that accrue to European Union Member countries are not as numerous as they were back in time. Then it would have been a big blow for any Country that decided to leave the union. Currently also, decline in the manufacturing coupled with diminishing tariffs and the overall decline of the European Union in the global market could have been used as the basis for the decision. (Ellison, 2016)
There are however both positives and negatives of Brexit to Britain as a Country. European Union has been associated with so many bureaucracies. These bureaucracies have made it so hard for signing of trade deals with countries that are not members of the European Union. However with the exit, Britain will now be able freely negotiate and sign new trade deals without taking much time. This could not be possible for any member country .Britain can even sign free unilateral trade policy because it is not controlled by the rules of the union. (Godlee, 2016)
It has also been argued that the Exit will enable the British government save several billions of pounds that would have been paid as contribution to the European Union budget. This value could change depending on the rate of economic growth after the exit. However, despite the fact that a considerable amount of savings will be possible, Howeverthese savings could be offset because of the economic decline that will be witnessed .Lower migration may also reduce the significance of these savings. (Mavrozacharakis, n.d.)
The British government may also be forced to forego custom duty income to increase its changes of signing new trade deals with other countries. The country may also be obliged to continue contributing money to the union with the intent of preserving single assess. This therefore means that the overall effort will not be so impactful.
A number of negative impacts have been identified as likely to result from the move by Britain. The first and most significant impact is that trade is likely to be tremendously affected. With the exit free movements of goods is likely to be restricted which is likely to reduce the volume of trade taking place between the country and other member countries. New Restrictions are likely to be imposed which will have an overall negative impact on the trade.
Additionally with a reduction in the amount of trade economic growth is also likely to b impacted. The level of economic growth within a country is directly proportional to the level of economic activity within a county (Emerson, 2016). Research has shown that almost half of all goods exported by Britain were exported to the European Union; this was possibly because of free trade that is allowed between member states. However compared to the period when Britain was a member of the European Union to currently economic growth has greatly declined because this free movement of goods is possible for member countries. It will also be costly for exporters who will have to incur additional costs for exports to European Union member countries will A negative trend in the economy of a country is likely to have a detrimental impact in its overall growth.
The exit could also have an impact on foreign investments .It has been argued that one of the reasons that had influenced direct investments by foreign companies in Britain was as a result of the possibility of accessing a single market. However the reliability of this argument has not been established because there are several factors that can influence investments in foreign countries.
Loss of value of the British piound.Significantly affected was the British pound which depreciated in value after Brexit. The pound recorded significant depreciation in relation to other major world currencies such as the US dollar. The depreciation recorder in only two days after Brexit had never been experienced in the country for more than three decades. Not only has the exit affected the British pound it is has also affected the relationship between Britain and its trading partners in the international sphere.
The move will not only affect the British Economy but other world economies as well. Being one of the largest economies in the world, Britain’s value of imports is estimated at billions of dollars. With the depreciation the value of the British pound its purchasing power will decline meaning that the economies of those other countries where the exports were originating from will not will have lost export revenue leading to a decline in their economic growth. So it there is going to be a decline in the economy of Britain the same will also happen for other European union economies based on the fact that the relationship between these countries was mutually dependent.
In as far as the whole issue is concerned; Brexit is not a good thing for the United Kingdom because despite the fact that there are a number of advantages the disadvantages outweigh them.
The first issue touches on security .In as far as security is concerned; members of the European Union have the advantage of sharing intelligence on security issues. With the rise in the incidences of insecurity world wide United is likely to be disadvantaged because unlike other countries within the union it will not be able to access shared intelligence information which is likely to have an impact on its security. (Heisbourg, 2016)
The economic impact is another major reason as to why Brexit is not good for the United Kingdom. It has been estimated that by the year 2020 each home will have lost several thousands of pounds as result of Britain Exit. Not only will this lead to so much loss but it will also lead loss of several jobs. Basically a thriving economy is a source of employment however with Brexit the economic decline that is liklekty to be experienced will make several people jobless as the economy will not be able to create adequate jobs for the working population. (Das, 2016)
For businesses in British that to some extent depend on international markets in countries that are mamanbers of the European their plans to expand their operations in more countries is likely to be hindered by this move. This will not only affect the particular businesses but also the wider economy of the country.
The move will also deny Britain an opportunity to penetrate other markets because it will involve paying of taxes and deprive it the initial privilege of free movement of goods between European Union countries which is likely to impact on their ability to trade in the international markets.
The Exit also mean that all the trade deals that existed between Britain and other European Union member states will no longer be operation meaning that the country will begin signing of trade deals and agreements with other countries afresh. This will to a large extent slow its development rate.
References:
Reid, G. (2016). Science and Brexit. Science. https://dx.doi.org/10.1126/science.aah4245
Ellison, R. (2016). Brexit triggers uncertainty over future of research in UK. Prescriber, 27(7), 14-15. https://dx.doi.org/10.1002/psb.1477
Godlee, F. (2016). Beyond Brexit. BMJ, i3615. https://dx.doi.org/10.1136/bmj.i3615
Mavrozacharakis, E. Brexit (The Brexit as Expression of the Social and Democratic Deficit of the EU). SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.2802580
Das, S. (2016). What Will History Make of Brexit?. Wilmott, 2016(85), 16-19. https://dx.doi.org/10.1002/wilm.10532
Heisbourg, F. (2016). Brexit and European Security. Survival, 58(3), 13-22. https://dx.doi.org/10.1080/00396338.2016.1186973
Harries, M. (2016). Brexit and Political Malpractice. Survival, 58(3), 31-40. https://dx.doi.org/10.1080/00396338.2016.1186975
Emerson, M. (2016). The Economics of a Brexit. Intereconomics, 51(2), 46-47. https://dx.doi.org/10.1007/s10272-016-0574-2
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