Consequences of Brexit

10 Key excerpts on "Consequences of Brexit"

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  Brexit

  Why Britain Voted to Leave the European Union

  • Harold D. Clarke, Matthew Goodwin, Paul Whiteley(Authors)
  • 2017(Publication Date)
  • Cambridge University Press

    (Publisher)

  175 1 7 5 8 The Consequences of Brexit The previous chapters have told the story of the Brexit referendum, locating its origins in a variety of long-term political and economic developments in Britain and Europe. In the immediate aftermath of the referendum result, markets reacted quickly and the value of the pound plummeted along with the stock market. However, this reac- tion was not sustained for very long and the stock market recovered to its pre-referendum levels fairly quickly and the value of the pound started to rise again, although it did not achieve pre-referendum levels. As new economic data emerged in the immediate months after the referendum, it became apparent that consumer confidence was still buoyant and unemployment continued to fall. The dire warnings of an immediate economic crisis following a vote to leave had been proved wrong. Moreover, a few months after the vote the Bank of England’s chief economist would publicly admit that his profession had both failed to foresee the 2008 financial crisis and misjudged the impact of the Brexit vote, with the latter being traced to a failure of economic models to cope with ‘irrational behaviour’. 1 That said, concerns were expressed that Brexit would have serious long-term consequences for investment in Britain and could damage trade relationships in Europe in the long run. After the vote it also became clear that the Government had made few preparations for a Leave vote, and so Whitehall had to start work on the mammoth task of separating Britain from the EU. Once installed as the new Prime Minister, Theresa May, who had advocated a Remain vote, created a new government department for ‘Exiting the European Union’ and put three prominent Eurosceptics in charge of preparing for the negotiations with the EU.

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  Brexit and the Future of the European Union

  Firm-Level Perspectives

  • Marian Gorynia, Barbara Jankowska, Katarzyna Mroczek-Dąbrowska, Marian Gorynia, Barbara Jankowksa, Katarzyna Mroczek-Dąbrowska, Barbara Jankowska, Marian Gorynia, Barbara Jankowksa, Katarzyna Mroczek-Dąbrowska(Authors)
  • 2021(Publication Date)
  • Routledge

    (Publisher)

  The projected effects of Brexit on the EU and the UK1

  Marian Gorynia, Aleksandra Kania, Ewa Mińska-Struzik

  Introduction

  The origins of Brexit presented in Chapter 2 lead to a broader reflection, which boils down to the following questions:

  • What were the tendencies in international economic relations in the second half of the twentieth century and in the twenty-first century?
  • Do these tendencies continue and are likely to continue, or do we face a period of re-evaluations and peculiar twists and turns?
  • What are the fundamental challenges for humanity due to globalization regardless of Brexit and what impact can Brexit have on them?
  • In what sense do contemporary processes form the Brexit’s basis and context? What does Brexit change in these tendencies?

  This subchapter attempts to answer these questions.

  The UK’s decision to leave the EU was a landmark moment for European integration. The British electorate voted to leave the EU by a 51.9% majority. The result of the referendum on Brexit organized on June 23, 2016, surprised many observers and started a series of attempts to anticipate what the consequences would be for both the British and European economies. Several institutions published model-based forecasts on the economic Consequences of Brexit, including the OECD, Oxford Economics, the Centre for Economic Performance, PricewaterhouseCoopers (PwC) and HM Treasury. Some experts, such as those from PwC, predict a slight negative impact of Brexit on British GDP, which equals 1.3% in the short term. Others, such as the researchers from the Centre for Economic Performance, predict a significant fall in British GDP in the long run, which equals 9.3%. All these institutions adopted two assumptions for the UK’s relations with the EU after Brexit. First, the UK would make a zero or lower contribution to the EU budget, depending on the state’s access to markets. Second, trade relations between the UK and the EU would change (Armstrong, 2016).

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  Origins and Consequences of European Crises: Global Views on Brexit

  • Birte Wassenberg, Noriko Suzuki, Birte Wassenberg, Noriko Suzuki(Authors)
  • 2020(Publication Date)
  • Peter Lang Group

    (Publisher)

  PART 3 THE ECONOMIC AND LEGAL Consequences of Brexit The “Real” Costs of Brexit Emmanuel Brunet-Jailly On 23 June 2016, Britain decided to leave the European Union (EU) in a referendum vote. Since then, the results have remained controversial for several reasons. First of all, the referendum revealed deep regional cleavages in opinions with regards to EU membership, as evidenced by the defeat of Brexit ideas in Scotland and Northern Ireland. Those were confirmed by the results of the last parliamentary elections in December 2019. Secondly, since the referendum, there is emerging evidence that several misleading claims were made by the Brexit campaign. As a result, many have asked for a second referendum or an election; a new election was held on 12 December 2019 and brought a large majority to the conservatives. Key misrepresentations of a number of important determining issues, including the cost of being in the EU and the cost of leaving the EU, remained under-explored. These form the core elements of this paper, which focuses on the costs of leaving the EU with a specific focus on the implementation of border infrastructures, staff, and necessary reforms across government offices necessary to implement UK custom borders. Costs, obviously are varied and thus assessing costs is complex. Also, as discussed in this chapter polarized opinions on the overall Brexit costs led to toxic debates; There is however consensus among experts which guides our assessment; for instance at the end of 2019, it is important to acknowledge that all international financial institutions were predicting that Brexit will have (variable) but negative impacts on the British economy. 1 The estimates were “an output loss of between 5 and 8 percent in the World Trade Organization (WTO) scenario compared 1 Arregui, N., Chen, J., “United Kingdom”, Washington, International Monetary Fund, Country Report 18/317, 25.10.2018.

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  Small Business Management and Control of the Uncertain External Environment

  • Konstantinos Biginas, Stavros Sindakis, Antonia Koumproglou, Vlasios Sarantinos, Peter Wyer, Konstantinos Biginas, Stavros Sindakis, Antonia Koumproglou, Vlasios Sarantinos, Peter Wyer(Authors)
  • 2022(Publication Date)
  • Emerald Publishing Limited

    (Publisher)

  Once the UK opts out of the EU, the existing chains require re-configuration and re-design. All investment priorities concerning warehouses and similar would favour the pre-Brexit UK–EU relationship. If post-Brexit transaction costs of trade become too high, companies will have to recheck their existing or projected destinations in the UK (Bartels-Velthuis, Blijd-Hoogewys, & Van Os, 2011). Clearly, the nature of the deal that Boris Johnson (British Prime Minister) closed and the unfolding of the fine detail of the operational implications of that deal determines the ultimate severity of the situation. Indeed, overall impact embraces numerous aspects of the business, including the geographi cal location, trade costs, side effects of custom barriers, delay in timely delivery of materials and less availability of migrants from the EU region due to immigration laws. This emerging business environment pushes the small business to adopt a more concerted learning perspective towards identifying and understanding those areas of change relevant to it and the implications of that change (BBC, 2019). Chapters 2 and 3 of this book focus on the entrepreneurial learning capabilities and the forms of growth-achieving small businesses. The Brexit movement led to both immediate as well as the long-term impact on the economy of the UK. In context to direct result, instances of inflation can already be highlighted (which have reduced British income of small businesses by 1.3%). Alongside this, scope for investment reduced rapidly by 6%, this underpinned by a post-Brexit full of uncertainties. Long-term impact on the economy includes a reduction in real per-capita income level, and a fall in GDP by 4.5% (C. Burns, Gravey, Jordan, & Zito, 2019). At the same time, it is evident that small businesses constitute a majority of private sector businesses, resulting in a combined turnover of £1.9 trillion

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  Poland in the Single Market

  Politics, economics, the euro

  • Anna Visvizi, Anna Matysek-Jędrych, Katarzyna Mroczek-Dąbrowska, Anna Visvizi, Anna Matysek-Jędrych, Katarzyna Mroczek-Dąbrowska(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  17Brexit and its potential consequences for Poland – the perspective of Single Market principles 1 Anna Matysek-Jędrych and Katarzyna Mroczek-Dąbrowska

  Introduction

  On June 23, 2016, the citizens of the Great Britain voted to exit the European Union (EU), the so-called Brexit vote. This decision increased uncertainty and created a wide range of adverse consequences for the United Kingdom, other EU member states, and the wider region overall. A vote for Brexit could be perceived as a starting point for the third European crisis, following the euro zone debt crisis and the migration issue. The result of the referendum generated, above all, quite a large shock to the British economy. Nevertheless, for remaining EU member states, Brexit is not a zero-sum game, and this will impact each state to varying degrees. The strength of impact depends, among others, on the scale of investment and trade expositions to the United Kingdom, political channel and new regulatory dynamic with the UK as a non-EU member state.

  Although at the end of January 2020 Brexit became a fact, the final arrangements of the ‘divorce’ have not yet been set. In October 2019 the EU and the UK signed a Political Declaration that is supposed to become a framework for future relations. However, the Declaration remains vague, and it lacks support in any tentative numbers. It is therefore quite safe to say that all options are still on the table.

  Although Brexit is now a done deal, the number of supporters and opponents of Brexit seems still to be nearly equal, and arguments for both groups strongly relate to geopolitical and social – in some cases extremely populist – fundamentals. While Eurosceptics2 (see, e.g., Smith, 1995; Franklin, Marsh, and McLauren, 1994; George, 1998; De Vries and Edwards, 2009; Morris, 2013) emphasize the increase of national sovereignty, less EU-rooted regulatory burdens, and lower welfare losses as a consequence of lacking EU protectionism, Europhiles (see, e.g., Springford and Tilfors, 2014) tend to concentrate on European unity as a mechanism for reducing political, economic, social, or military risks, thus creating an environment free of conflict (for more on economic costs of conflict see Abadie and Gareazabal, 2003). Most authors use a multidimensional approach to assess the Brexit impact. In contrast, we focus purely on economic ramifications, derived from the critical assessment of the disintegration process. Our measurable of interest, ‘Brexit impact’, is defined as the disintegration-specific loss of Common Market gains driven by the United Kingdom’s withdrawal from the European Union.

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  The EU's Crisis Decade

  Reflecting on EU Capitalism and Governance

  • Chih-Mei Luo(Author)
  • 2019(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Carole Cadwalladr (2016), a famous Welsh writer, observes that the sense of inequality, both economic and political ones, explains the Brexit vote than the sums of other facts. Thus, Jones (2016), O’Hagan (2016), and Daran Hill (BBC, 24 June 2016d) all view the surprising outcome of Wales’ vote for Brexit as an anti-government, anti-establishment vote. Their argument of protest vote was verified by a post-referendum survey in which the majority, 53%, of Welsh voters would change to vote for Bremain if there was a second referendum. It was a 6% swing in the direction and the so-called ‘ Bregret’ votes for being cast to protest the government (The Independent, 5 July 2016f). To sum up, as the former UK representative to Taiwan, Michael Reilly, concludes, both economic rationales and political dissatisfaction explain the overall outcome of Brexit (interviewed with the author on 30 August 2016). Together with local factors in southern England, frustration and dissatisfaction of disadvantaged voters with the economic status quo in northern and eastern England and protest votes to the then Conservative government in Wales finally led to the unexpected outcome of Brexit. 4 The Implications of Brexit for European Integration The immediate impact of Brexit to the rest of the world was economic. The outcome has caused immediate downfalls in the worldwide financial markets. The IMF also cut its forecasts for global growth for 2016 and 2017 both by 0.1% to 3.1% and 3.4%, respectively, as a Brexit result, despite claiming that economic Consequences of Brexit were still unfolding (IMF, 2016 : 1–3). The chaos of financial markets could be settled and cleared after some times, but the implications of Brexit for worldwide regional integration were more enduring and challenging. What messages were delivered from Brexit and how these messages imply for European integration need to be identified

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  An Accidental Brexit

  New EU and Transatlantic Economic Perspectives

  • Paul J.J. Welfens(Author)
  • 2017(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Some Reflections on the Economist’s Role in the Brexit Debate An economist’s analysis of Brexit is not convincing if the key mecha- nisms which led to the referendum outcome are not understood or if the main consequences of the Brexit vote are over- or underestimated. The Bank of England and indeed some other skeptical forecasters—who 128 P.J.J. Welfens emphasized a quick deterioration of the British economy in 2016— have lost credibility because there was an overestimation of the short- term effects of the Brexit vote. However, it was the Bank of England itself that cut the interest rate within a few weeks of the referendum and this has helped to stabilize the economy as did the US Trump stock market rally which has raised stock price indices everywhere in the EU. The negative effects of Brexit will become noticeable in the British economy only gradually and the strong Pound depreciation of 2016/17 could even raise employment through higher non-anticipated inflation in the medium term—the decline of real wage rates will stimulate hir- ing on the side of firms. Eventually, the rise of the inflation rate will undermine the real income of workers unless trade unions could get off- setting nominal wage increases which, however, is not very likely. Hence the growth of consumer demand will decline in the medium term in the UK, but given the expansionary impulses from the US, there will not be an immediate recession that would possibly shock many people—and the later a possible recession comes, the less voters will associate this with the referendum’s outcome. As long as there are at least modest growth rates in the UK, few Brexiteers would have doubts about the historical vote to leave the European Union—and most of them would probably deny that their vote would have been any differ- ent if credible economists or a well-organized government had informed them prior to June 23, 2016, that the long-term economic costs of Brexit will be about 10% of income.

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  Discourses of Brexit

  • Veronika Koller, Susanne Kopf, Marlene Miglbauer, Veronika Koller, Susanne Kopf, Marlene Miglbauer(Authors)
  • 2019(Publication Date)
  • Routledge

    (Publisher)

  Wikipedians also repeatedly and consistently refer to the uncertainty with which predictions about Brexit effects can be made. In a total of 64 concordance lines, that is in 40 per cent overall, Wikipedians make reference to the certainty – or lack thereof – with which the repercussions of Brexit can be known already. Of these, 39 lines give a clear indication concerning whether the editor in question believes that Brexit consequences can or cannot be accurately predicted before the actual Brexit set to occur in March 2019: on the one hand, 23 lines argue that the ‘effects of Brexit on the UK and the EU are, as yet, unknown’ and ‘it’s difficult to know what the effect of the UK being outside the EU is going to be’. On the other hand, 16 concordance lines counter this view, e.g. ‘There is overwhelming agreement on what the effect on the UK economy is’ and ‘“commonly discussed and analysed but remain uncertain” is just bullshit when it comes to the economic impact’. All in all, the dominant view is that Brexit effects cannot be known with certainty yet, although there is a marked counter-stance to this perspective as the latter two examples demonstrate.

  These last two examples also illustrate another remarkable aspect, namely that there is considerable overlap of reference to economic consequences and (un)certainty (see also Lutzky & Kehoe, Chapter 7 this volume) – of all 78 lines making reference to economic consequences and all 64 lines focusing on (un)certainty, there is an overlap of 35 concordance lines that refer to both issues. In this context, another aspect can also be observed: where posters concede that there is uncertainty regarding Brexit consequences on the UK’s economy, they argue that this uncertainty in itself will lead to negative consequences. To give an example, one poster argues that Brexit cannot have had negative effects to date as it has not occurred yet and the particularities of Brexit are as such uncertain and unknown. However, this posting is met with ‘[t]here’s somebody who needs a primer on the effects of uncertainty in economics’: using an ad hominem

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  The European Union and the Eurozone under Stress

  Challenges and Solutions for Repairing Fault Lines in the European Project

  • John Theodore, Jonathan Theodore, Dimitrios Syrrakos(Authors)
  • 2017(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  This is partly because many of the costs and benefits are, in certain respects, subjective, diffuse of intangible; and partly because a host of assumptions must be made about the terms on which the UK would depart the EU, and how the Government would fill the policy vacuum let in areas where the EU currently has competences. (House of Commons Library, 2013, reproduced in Eichengreen 2016e). Brexit proponents have frequently asserted their case by resorting to pointing out the UK’s relative economic strength as the world’s fifth largest economy (now, ironically, sixth with the plunge in the pound), thereby providing, with the substantial and widening British trade deficit, 22 an apparent motive for the EU in maintaining the current status quo – that is keeping in place the UK’s position in the Common Market, without resorting to tariffs and quotas on UK exports to EU. Indeed, the volume of German exports to the UK, standing in excess of £50 billion in 2015, makes a seemingly compelling case for that argu- ment. However, whether or not the EU will come to agree on a deal that is satisfactory to the UK is far from certain. For example, for how long 22 http://www.tradingeconomics.com/united-kingdom/balance-of-trade. 144 6 Brexit and the Economy would the UK consumer be able to sustain purchasing the same volumes of German or other EU exports to the UK? The ability of the UK households to purchase EU products depends on their purchasing power. This power is inextricably linked to the value of the pound and domestic inflation in relation to other competitors’ inflation. Depreciation of the pound sterling in relation to the Euro implies an equal erosion in the UK households’ capacity to purchase Eurozone products. Brexit proponents have drawn on the positives of the sharp devaluation in the pound over 2015–2016: namely, the reduction in the cost of production and the increase in the volume of UK exports that this will bring.

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  How Referendums Challenge European Democracy

  Brexit and Beyond

  • Richard Rose(Author)
  • 2020(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  2016b : 6). It conceded that these effects would depend on the success or otherwise of the negotiations with the EU in the event of a vote to leave, but it nonetheless thought that they would be substantial.

  Finally, the financial conditions effect related largely to the impact of the vote on the City of London and on financial assets more generally. It suggested that: ‘In the immediate aftermath of a vote to leave, financial markets would start to reassess the UK’s economic prospects. The UK would be viewed as a bigger risk to overseas investors, which would immediately lead to an increase in the premium for lending to UK businesses and households’ (HM Government 2016b : 7). It suggested that these effects had already become apparent in April 2016 before the referendum took place, citing a fall in the pound, a similar effect in the housing market and also in business investment as examples of these anticipated effects.

  The Treasury’s econometric analysis produced some specific predictions about the financial effects of a vote to leave the EU arising from models analysed over the two-year period. Two scenarios were examined, one of which was described as a ‘shock scenario’ and the second as a ‘severe shock scenario’. The first of these assumed that the Brexit vote shock would be rather similar in magnitude to the effects of the recession in 1990–1991. The ‘severe shock scenario’ was assumed to be 50% worse than the ‘shock scenario’ in its effects on the variables specified in the modelling.

  The specific predictions of the effects of the vote on the two scenarios appear in Table 9.1 . As shown, the forecasts are uniformly negative, anticipating a reduction in GDP of 3.6% in the ‘shock scenario’ and 6.0% in the ‘severe shock scenario’. In addition, the modelling predicted significant increases in inflation and rising unemployment by just over half a million people in the first scenario and more than three-quarters of a million in the second. It also predicted substantial reductions in real wages, house prices and the sterling exchange rate. Finally, it forecast that the Public Sector Borrowing Requirement, the difference between government income and expenditure, would increase by at least £24 billion over the two-year period.

  Table 9.1 Treasury estimates: short-term impact of Brexit, fiscal year 2016/17 to 2017/18

  	Shock scenario	Severe shock scenario

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