The economic arguments for and against Brexit are as follows:
Immigration: The argument against this topic states that it will not be possible for Britain to control immigration unless it leaves the European Union (EU). This is mainly because; freedom of movement gives the residents of EU an automatic right to live there. If Brexit takes place, the progress of Britain will stop, as they will not be able to recruit large number of skilled and unskilled workers from Europe as leaving EU will stop immigration to the UK. The event of Brexit will lead to economic downturn that will make Britain more unappealing as compared to other parts of Europe. As a result, Britain will become more poor and it will fall of its own agreement.
The argument for this topic states the fact that leaving EU will not resolve the migration problem and lead to increase of the problem in the country. . Leaving the European Union will lead Britain to choose their own immigration policies that will lead to decrease in the number of immigrants (Cumming and Zahra 2016).
Trade: The argument against this topic states the fact that the link of Britain with EU will hold back the focus on emerging markets. This is mainly because, with the association with EU, UK will not be able to diversify its global links.
However, the argument for this topic states the fact that Britain has been the member of the EU for more than forty years. As a result, the decision to leave EU will lead to a period of economic uncertainty for both business and households. This will in turn, will create a negative effect on spending (Koutrakos 2016).
Business: It has been predicted that Britain will remain a leading economic centre outside the EU and as a result, capital flight is not taken into consideration.
However, on the other hand, if Britain leaves the EU the banks will flee the UK and the City of London collapse. This is mainly because; the advantages from trade with EU will help to enhance profits of the banks.
Jobs: The risk related to jobs has been over-exaggerated. Britain can thrive like the Scandinavian countries by incentivizing asset through low business tax as well as other benefits. Brexit will also lead to loss of thousands of employees. Many firms in Britain depend on the EU for their jobs. The invasion of employees from Eastern Europe had drive down wages in various sectors in Britain that had led to suffer of the Britain workers.
However, on the other hand it has been argued that if Britain leaves the EU, most of the people will be unemployed. This is mainly because around three million jobs are associated to the EU. The rate of unemployment will jump and the Gross Domestic Product (GDP) and the value of pound sterling would be hit severely. The business will also become less probable to invest if the country was outside Europe. The cost of labor is also likely to be reduced in the UK after Brexit takes place. The large companies are likely to relocate to the UK as soon as possible. Various business leaders dislike being a part of EU as the European Union imposes an extra cost that restricts their freedom. Leaving the EU will also lead to increase in wages of the workers in Britain (Brugge et al. 2016).
Protection: The argument against this topic deals with the fact that if Britain is asked to contribute to an EU army, there will be a probability that Angel Merkel will demand approval of the Prime Minister in return for their allowances. As a result, independent military force of the UK will be eroded and combated. The EU is a force for tranquility and constancy in a continent that has long been cracked by wars and nationwide opposition. Large trades also desires to stay in EU for their own interest.
However, if Britain does not leave the EU, they will be able to combat the challenges and threats that they are facing from Isil and Russia (Angeli, Piano and Arroyo 2016).
As long as the UK stays in the EU, the industries will be able to do business anywhere on the continent as well as they will be able to move workers without any worries related to visa. The City of London mainly dominates foreign exchange trading. Pass porting is one of the most popular mechanisms that are used by the UK banks in order to expand base of the customers in the union. The EU firms mainly use to valve into the global financial markets, through London as an international financial hub. The downfall of the London financial centre also had a negative impact on the financial position of the country. As a result, the value of pound declined sharply and had a dramatic impact on financial markets and jobs (Schelkle 2016).
Recently, Paris made a bold pitch to persuade City of London bankers in the event of Brexit. London is likely to witness a mass departure of finance jobs in the wake of the Brexit vote. As per the report, more than 16,000 UK employees are likely to be shifted elsewhere in the EU. This will in turn, lead to high rate of unemployment. Brexit had reversed the financial tower of the City of London. In addition to the outlook that jobs will move to other financial centers, the City may also lose some of the most intelligent employees as the UK opts out of the EU. This will as a result, make the City less global once Brexit takes place. This is the very reason for which Germany rejected some ideas from the European Commission that led to permanent bureaucracy in Brussels. It also opposed to Brexit as leaving the EU will shut the UK out of its vital markets as well as from other markets in the world (Fichtner et al. 2016).
German is the first countries that reacted and act on punish British, with other issues pressing that included Greek debt as well as migrant crisis and terrorism, the largest and most powerful European countries looked for clarity. As per the German minister, if British exit EU that will lead to exit with no scope related to entry. He also hoped for the fact that Britain will think about the decision again and will drop the idea of Brexit. He also stated that Europe is going to suffer largely once Brexit takes place. The long-term consequences will lead to destruction of not only the European Union but also the Western Political Civilization. As a result, German and France led to a joint initiative related to European security that will help Europe to survive even without Britain. Hence, Germany rejected some ideas initiated by the European Commission in order to respond by moving quickly towards more European political.
The British firms are experiencing tremendously high levels of instability with sharp falls in Sterling due to Brexit. This also resulted in the downgrade of the credit rating in the UK. Brexit led to intermediary risks that deteriorated the economy and led to high-risk premia that is associated with an uncertain political and economic landscape. Brexit had primarily reformed the UK financial services. The exit of British from the EU would diminish the economy rather than enhancing the standing of the economy (Kierzenkowski et al. 2016).
The pound plunged as low as $1.32 as compared to the US dollar due to overnight trading. This resulted in the fall of stock markets and as a result, Brexit worsened the British pound. Sterling descended by 10 percent in value to its weakest point. The crash of pound will affect the economy that will make the economy grow slowly if Britain leaves the EU. The weak pound will have a strong collision on prices. The decrease in the value of the pound against the dollar is probable to make the extensive cost to UK retailers higher. As a result, the tour operators in Britain will impose supplement as the cost of a package holiday increases due to changes in the currency as well as increase of fuel charges. The pound crush will lead to increase in the price of imported goods and as a result, imported goods are bound to become more expensive. The pound droop against a weighted basket of currencies is less harsh. The UK foreign investments will become more competitive and as a result, exports will also become more competitive in the UK (Mendez-Parra, Papadavid and Te Velde 2016).
Hedge funds are mainly built to help Britain after the exit of EU. The Alternative investment Management Association mainly represents the interest of hedging funds. The hedging tool in this case will be clearing house. Clearing houses will mainly agree with the individuals over the panic-stricken weekend that they are likely to experience after Brexit. In that case, the UK cannot afford to get out of the single market or else, clearing house will be not being able to move first. Clearinghouses have also increased the amount of margin traders that pledged derivative contracts in the wake to leave the EU. The falling pounds will act as good news for exporters as made the products relatively cheaper for overseas customers to purchase. As a result, the UK companies are able to trade with European Union on a tariff free and quota free basis (Goryunov, Kiyutsevskaya and Trunin 2016).
To overcome the difficulty or to manage risk, two main scenarios are analyzed that can be termed as an optimistic scenario and a pessimistic scenario. In the optimistic scenario, it is assumed that the trade relation of the UK with EU is identical to those that are currently enjoyed by Norway. Being a member of the European Economic Area (EEA) Norway shares a free trade agreement with the European Union that results in a no tariff trade between the two countries. As per the pessimistic scenario, the UK is not successful in negotiating a new trade agreement with the EU. Brexit will lead to increase in trade costs between the UK and the EU that is mainly divided into three parts. These three parts includes higher tariff on trade, higher non-tariff barriers as well as the UK may not contribute in future steps that the EU makes towards deeper incorporation. It is assumed the trade between the UK and the EU is subject to one quarter of the reducible non-tariff barriers. It is also assumed that MFN tariff are imposed on UK-EU trade related to goods (Larionova and Shelepov 2016).
Angeli, P., Piano, S. and Arroyo, V., 2016. Brexit from current guideline recommendations?. Gut, pp.gutjnl-2016.
Brugge, G.S., Perraton, J., Lindstrom, N., Evans, P.M., Lee, S., Quaglia, L., Erturk, I., Dannreuther, C., KCL, S.J. and Wilson, S., 2016, June. Britain and Europe: The political economy of ‘Brexit’in trade and finance Workshop at the University of York, 14 June 2016. In Workshop at the University of York.
Cumming, D.J. and Zahra, S.A., 2016. International Business and Entrepreneurship Implications of Brexit. British Journal of Management, forthcoming.
Fichtner, F., Große Steffen, C., Hachula, M. and Schlaak, T., 2016. Brexit decision is likely to reduce growth in the short term. DIW Economic Bulletin,6(26/27), pp.301-307.
Freund, P., 2015. Opportunities and Risks of the Proposed Referendum on United Kingdom’s Membership in the EU (BREXIT).
Goryunov, E., Kiyutsevskaya, A.M. and Trunin, P., 2016. Brexit Results: Macroeconomic Risks. Russian Economic Developments. Moscow, (7), pp.51-53.
Kierzenkowski, R., Pain, N., Rusticelli, E. and Zwart, S., 2016. The Economic Consequences of Brexit.
Koutrakos, P., 2016. Brexit and International Treaty-making. European law review, (1), pp.1-2.
Larionova, M. and Shelepov, A., 2016. Post-Brexit Britain: Its Relations with the EU and Its Future in the Framework of Multilateral Institutions.
Mendez-Parra, M., Papadavid, P. and te Velde, D.W., 2016. Brexit and development.
Schelkle, W., 2016. Financial Centre and Monetary Outsider: How Precarious is the UK’s Position in the EU?. The Political Quarterly, 87(2), pp.157-165.
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