Brexit and the UK Economy: Benefits and Challenges

Introduction

Brexit is the short form of “British Exit” i.e. it refers to the decision of U.K to leave the European Union. The motion was initiated by a referendum on 2016. The formal process began in May 2017 (Begg, 2017). It was the decision of the Prime Minister of Britain Theresa May. The decision was criticised and analysed by many economists globally. The motion was passed by attaining 51.9 per cent of the votes, whereas 48.1 per cent voters voted against this motion. Many studies have been done on what are the implications of Brexit on the economy of U.K as major changes will shape up the situation due to the monopoly of U.K (Begg, 2017).

Benefits

According to a study conducted by Economists for Free Trade, there will be a 5 to 7 per cent boost in the economy of U.K due to its exit from the EU as it can adopt free trade. By being free from the regulations of the EU, U.K can reduce costs and expenses relating to businesses. The deregulation will lead to a boost of 2-7.5 per cent (Begg, 2017). The immediate advantage is the freedom from payment of membership fee to EU which is very hefty.  The U.K can collaborate with unilateral trade law and reduce barriers with the non-member countries of the EU. This will strengthen trade relations and lead to an increase in GDP of U.K in the coming 15 years (Begg, 2017).  By giving up on the membership of the EU, U.K has gained freedom over many domestic affairs and product pricing. Thus, it can design tariffs and product specification suited to its needs and growing demand for home products (Ivana Kottasová, 2019). The fishing industry will thrive immensely. The immigration problem of U.K will be solved which will lead to an increase in employment. Since, by leaving the European Union, U.K can curb the problem of terrorism by controlling its borders and thus it has to invest less in counteracting these attacks. This can result in utilising of those funds in improving agricultural and aerospace sectors and the creation of jobs (Ivana Kottasová, 2019).

Challenges

There will be an immediate downfall in the economic condition of U.K after Brexit. It may lose its stand as the world’s major financial centre. Within the EU, the member states had the benefit of tariff-free export and import. However, now U.K will lose that benefit and has to face major challenges in form of a reduction in trade with the member countries. Moreover, it will also lead to a magnification of the trade barrier with the other countries which have treaties with the EU. It will be devoid of benefits from the trade deals (Ivana Kottasová, 2019). Majority of the foreign direct investments were provided by EU countries to the UK. This will be ceased and the economy of U.K will take a major hit and its overall productivity will decrease. By lowering of immigration due to Brexit, the number of skilled labourers and workers are reducing and this has impacted the innovation and quality of service. About three million jobs will be lost due to Brexit due lowering of the flexibility of movement across borders. The GDP may fall by 0.2-1.6 per cent. The markets and different sectors of U.K will take time to establish their sovereignty and this can lead to economic crisis.  The citizens will be impacted as their wages can be reduced and quality of life can be degraded (Ivana Kottasová, 2019).

Conclusion

The macroeconomic and microeconomics conditions around the globe changes at every instant. Thus. It cannot be said surely whether Brexit is harmful or advantageous to U.K. If U.K can handle the effects of Brexit properly and implement its policies strategically then only it can become self-sustaining and thriving economy like Singapore. The downside is that the improper implementation of policies and political conditions can significantly hamper the economy of U.K due to the backlash from the European Union. Brexit wild impact all the countries of the world and is bringing a major variation in the trade laws and tariffs.  

Reference

Begg, I. (2017). Making sense of the costs and benefits of Brexit: challenges for economists. Atlantic Economic Journal, 45(3), 299-315.

Ivana Kottasová, C. (2019). The UK government says its Brexit deal will hurt the economy. Retrieved from https://edition.cnn.com/2018/11/28/economy/brexit-economic-impact/index.html