Economics
Impact of Brexit on UK Economy
Brexit has had a significant impact on the UK economy, leading to uncertainty and volatility in financial markets, as well as affecting trade relationships with the EU. The depreciation of the pound, potential barriers to trade, and changes in investment patterns have all contributed to economic challenges for the UK. The long-term effects of Brexit on the UK economy remain uncertain.
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11 Key excerpts on "Impact of Brexit on UK Economy"
eBook - ePubBrexit 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 UK1Marian Gorynia, Aleksandra Kania, Ewa Mińska-StruzikIntroduction
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?
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).
- 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)
Sampson, 2017 ). This may cause long-lasting damage to the British financial sector in that it might set off a dangerous process of brain drain that would undermine one of the principal reasons London rose to prominence. Clearly, this needs to be given serious consideration when assessing the overall impact of Brexit on the UK’s knowledge economy. A main concern involves an effect on the whole trading system and fluctuating currency values. One early effect was higher inflation in the UK market in 2018.A key objective of this chapter is to understand the plight of small businesses and how entrepreneurship will be affected through working under different EU–UK relationships and UK relationships with other economies. Associate issues include relevance and impact of small business operational culture, financial needs and strategic management tools and skills (Druker, 2009 ; Eshima & Anderson, 2017 ). The Brexit threat is also unfolding in the context of the new start-up culture and emerging platform of E-business setups, with associate shift of business model and leadership style in the business. Hence, let us first understand the two main aspects of these topics, that is, Brexit and the state of small businesses in the EU (McCann & Ortega-Argilés, 2016 ). Though Brexit was initiated by the UK Prime Minister, the main sticking point why even after two years Brexit was not completed was the issues of backstop for which the Conservative MP’s and the Democratic Unionist Party were battling. However, the key potential implications for small business trade of a fully implemented Brexit could be identified at an early stage, including:- Trade cost will increase.
- Transfer pricing may be impacted.
- Non-benefit of Free trade agreements (FTA) of the EU countries to non-EU countries.
- High impact over the gross domestic product (GDP) ratio of the UK’s economy.
- Political implications.
Given that the majority of the UK enterprises fall under the category of SMEs, with small businesses playing a vital role in the economy (Pryce, Nielsen, & McCabe, 2019), Brexit impacts such as those outlined above are likely to have high significance in economic, business and social development terms.2. Literature Review
eBook - PDFAn 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.
eBook - PDFBrexit
Why Britain Voted to Leave the European Union
- Harold D. Clarke, Matthew Goodwin, Paul Whiteley(Authors)
- 2017(Publication Date)
- Cambridge University Press(Publisher)
Source: Penn World Tables. The Consequences of Brexit 190 1 9 0 Economic growth has many determinants and so it would be mis- leading to argue that EU membership had the effect of slowing growth in most EU member states after they became members. But the impor- tant inference that can be made from available evidence is that EU membership did not boost economic growth and prosperity in a way that many people thought might happen when their countries applied to join. The fact that the accession of different countries varied over time means that the slowing of growth was not the product of period effects, that is, events such as the oil-price crisis of the 1970s that might explain such a slowdown across many countries at the same time. If it is hard to make the case that EU membership stimulated eco- nomic growth, it may be different for the other big issue that domi- nated the 2016 referendum, namely immigration. In Chapter 7 we saw that concerns about immigration had strong effects on the referendum vote, so it is important to assess the implications of Brexit for immi- gration to Britain in the future. We consider this topic next. Brexit and Immigration As we have seen, immigration was a key issue in the 2016 referendum campaign and was also central to explaining why the country eventu- ally voted for Brexit. Claims and counter-claims surrounded this issue, with Leavers in particular arguing that Brexit would enable the UK to curb immigration levels that have been a source of anxiety among voters for many years. But how might Brexit influence immigration? If economic forecasting is difficult, it is even more difficult to forecast patterns of migration. In their recent review of the literature on migra- tion forecasting, Disney and his colleagues conclude that: [T]here are many social, economic and political drivers which can impact migration flows, making forecasting migration an extremely difficult task.
eBook - ePubHow Referendums Challenge European Democracy
Brexit and Beyond
- Richard Rose(Author)
- 2020(Publication Date)
- Palgrave Macmillan(Publisher)
Brexit: Why Britain Voted to Leave the European Union . Cambridge: Cambridge University Press.Crossref- Coutts, K., G. Gudgin, and J. Buchanan. 2018. How the Economics Profession Got It Wrong on Brexit. Working Paper 493, Cambridge Centre for Business Research.
- Gudgin, G., K. Coutts, and N. Gibson. 2017. The Macro-Economic Impact of Brexit Using the CBR Macro-Economic Model of the UK Economy. Working Paper 483, Cambridge Centre for Business Research.
HM Government. 2016a. HM Treasury Analysis: The Long-Term Economic Impact of EU Membership and the Alternatives . CMND 9250, April, London, https://www.gov.uk/government/publications .HM Government. 2016b. HM Treasury Analysis: The Immediate Economic Impact of Leaving the EU . CMND 9292, May, London, https://www.gov.uk/government/publications .King, M. 2017. The End of Alchemy: Money, Banking and the Future of the Global Economy . London: Abacus.Knight, F.H. 1921. Risk, Uncertainty and Profits . Boston, MA: Hart, Schaffner & Marx and Houghton Mifflin Company.Minsky, H.P. 1982. Can ‘It’ Happen Again? . Armonk, NY: M. E. Sharpe.Minsky, H.P. 1986. Stabilizing an Unstable Economy . New Haven, CT: Yale University Press.Offer, A., and G. Söderberg. 2016. The Nobel Factor: The Prize in Economics, Social Democracy and the Market Turn . Princeton, NJ: Princeton University Press.Crossref- Office for Budget Responsibility. 2018. Brexit and the OBR’s Forecasts. Discussion Paper No. 3.
Phillips, A.W. 1958. The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom. Economica 25 (100) (November): 283–299.Taleb, N. 2007. The Black Swan: The Impact of the Highly Improbable . London: Penguin.Tett, G. 2009. Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Market and Unleashed a Catastrophe . London: Little Brown.Wray, L.R. 2016. Why Minsky Matters: An Introduction to the Work of a Maverick Economist
eBook - PDFThe 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)
The eventual outcome of this collision was the British Referendum. Overall, Brexit is potentially damaging to all parties. To start with, most European capital markets are located in London. Thus, raising capital in London for European countries is subject to Pound–Euro exchange rate volatility. As a result, financial integration in the EU is far from complete. Sterling also depreciated by 30% in 1931 and in 1947–1949, 14.7% in 1967, 25% in 1975–1976, 15% in 1992–1993 and 30% in 2008–2009. The latter improved markedly the UK econ- omy’s competitive position against the Eurozone nations. That is not to say, of course, that exchange rate fluctuations in the Pound-to-Euro exchange rate are the only reason to explain the number of EU workers to the UK – rigid labour markets in many Eurozone countries, especially France, and differences in tax systems are also exerting major influences. But the exchange rate plays a central role. For example, in the extreme case the value of the pound drops below 1 Euro; this will provide a major disincentive to European workers to move to the UK. On the other hand, the substantial appreciation in the value of the pound during 2014 and 2015, leading to a ratio of 1:1.4 Euros per pound by December 2015, has had adverse effects on UK exports to the Eurozone. As a consequence of all this, the absence of exchange rate arrangements between the UK and the Eurozone reflects the incomplete nature of both the Euro currency and the Customs Union. 7 A Review of the UK Economy, June 2010 to June 2016 Before assessing the impact of the Referendum on the UK economy, it is important to review the UK economic performance from July 2010 to July 2016. This is vital in order to identify the trends established in 7 The Customs Union Market accounts still for less than 40% of all economic activity in the EU. 136 6 Brexit and the Economy
eBook - ePubThe 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
- Birte Wassenberg, Noriko Suzuki, Birte Wassenberg, Noriko Suzuki(Authors)
- 2020(Publication Date)
- Peter Lang Group(Publisher)
In short, while 51.4 % of all UK export are going to the EU, those exports would be reduced year after year because of the likeliness of tariffs and quotas walls, or simply because of uncertainty. Clearly, the impact for EU Member States would also be 2 Ibid., p. 24. 3 Ibid. 4 Pollitt, M., “The economic consequences of Brexit: Energy”, Oxford Review of Economic Policy, vol. 33/S1, 2017, pp. 134–143. 5 Protts, J., Potential Post-Brexit tariff costs for EU-UK trade, London, Civitas, 2016. 6 Dhingra, S., Ottaviano, G., Sampson, T., Van Reenen, J., “The Impact of Brexit on Foreign Investment in the UK”, London, Center for Economic Performance, Paper Brexit 03, 2016. 7 Minford, P., Gupta, S, Le, V. P. M., Mahambare, V., Xu, Y., Should Britian Leave the EU? An Economic Analysis of a Troubled Relationship, Cheltenham, Edward Elgar Pub, 2016. See also a critique of Minford, P. views in: Dhingra, S., Ottaviano, G., Sampson, T., Van Reenen, J., “Economists for Brexit: a Critique”, London, Center for Economic Performance, Paper Brexit 03, 2016. 8 Nabarro, B., Schulz, C., UK Economic Outlook in Four Brexit Scenarios, London, Institute for Fiscal Studies, 2019. The “Real” Costs of Brexit 143 severe with exports to the UK being reduced by 5 to 15 % for Northern Ireland, with a pan EU average impact of about 6.6 %. In sum, it is not clear how much exiting the EU would cost the UK economy, but scenarios are generally not favourable to Brexit. 9 This chapter starts with a critical review and discussion of the various Brexit arguments and a detailed analysis of the various costs considered during and after the referendum campaign: Was being a member of the EU expensive? Will the EU be able to survive a British exit, and should UK custom borders be decisional factors, in particular, because of the situation of Northern Ireland.
- Institute for Strategic Studies, National Defense University of People's Liberation Army China(Authors)
- 2018(Publication Date)
- WSPC(Publisher)
16 Moreover, since the UK is the sixth largest economy around the globe, a permanent member of the UN Security Council, and a nuclear power, its exit from the EU will undoubtedly and substantially diminish the EU’s economic, diplomatic, and security strengths and decrease its discursive power in international regimes. Generally speaking, in international politics, changes in the balance of power are bound to cause structural changes, and the global power landscape is likely to change in the future as a result of these changes. In particular, the EU will be engaged in dealing with its internal affairs for quite a long time and have no time to attend to other external things. Multiple crises are so entangled that it will be very complex and hard to overcome them. All these will limit the EU’s desire to participate in international governance, and the EU’s capabilities will also decline to some extent.Second, the EU’s role model effect has been downplayed. The EU has always been advocating multiculturalism and inclusiveness, which is the fundamental fountainhead for the public of each EU member state to realize their “European identification” and is one of the important achievements of European integration, and even plays an exemplary role around the globe. Europe always has its own special geographical and humanistic environments, and European countries have different races, languages, religions, and customs as well as different development situations. Therefore, only by respecting and treating each other equally can they seek their common European identity under the precondition of retaining their own traditional cultures. It is this kind of European identity that has discarded the history in which nation states restricted their activities to designated areas and engaged in life-and-death battles for the sake of their own interests, and it is also this European identity that has institutionally solved the problem of peace in Europe. As a result, Europe has become an example of the current globalization, namely, seeking common ground while reserving differences for common development, and this is an important embodiment of the EU’s “soft power”. At the same time, as the cradle of modern capitalism, Europe has always boasted itself as the fountainhead of the Western civilization, and its human rights values have been regarded as the embodiment of its advanced nature. As far as the refugee problem is concerned, the EU acted at first out of humanitarian considerations with a deep sense of historical responsibilities for its former colonies in the Middle East and North Africa. Therefore, the EU took a relatively open attitude to refugees, believing that it could tolerate different religious, cultural, and ethnic groups. However, things have gone contrary to its wishes. The EU has been mired in a complex and thorny dilemma due to its attitude. Germany, the most active EU member state in taking refugees, has even been condemned as promoting “moral capitalism”. In fact, Europe is still a society whose mainstream is Christianity (including the Catholic Church, the Protestant Church, and the Eastern Orthodox Church). Although European governments have attempted to keep neutral relations between different religions, things have actually gone contrary to their wishes. In particular, more and more Muslim migrants from other countries are out of tune with the mainstream European society. This has made a clash of civilizations inevitable, and the EU’s humanitarian relief can even evolve into a humanitarian disaster. Consequently, the values always advocated by the EU have met serious challenges, and the EU’s “model student” aura is no longer in existence.
- Arkadiusz Michał Kowalski, Arkadiusz Micha? Kowalski, Arkadiusz Micha? Kowalski, Arkadiusz Micha? Kowalski, Arkadiusz Micha? Kowalski, Arkadiusz Micha? Kowalski, Arkadiusz Michał Kowalski(Authors)
- 2018(Publication Date)
- Palgrave Macmillan(Publisher)
13.3 Impacts of Brexit on Japan’s Trade and InvestmentThe possible implications of Brexit for Japan’s trade and investment are listed in the briefing paper published by the National Diet Library (see Table 13.2 ).Table 13.2Impacts of Brexit on Japan (short-term)Impact on exports , imports and investments(if the economic situation in the UK and the EU aggravates)Impact through exchange rate(if yen appreciates)• Slump in exports due to weaker demand in the UK and the EU • Decline in companies’ profits: Value of exports, dividends and royalties in companies based abroad fall • Decline in FDI in both countries as a result of growing uncertainty • Drop in exports competitiveness Source Issue Brief (2016 , p. 10). Own elaborationJapan , as an export-reliant economy, could suffer from any new trade barriers . The government’s efforts to create favourable conditions for future trade and investment between Japan and the EU, as well as Japan and the UK, were defined in the Japan -UK Joint Vision Statement , published in late August 2017, during British Prime Minister Theresa May’s official visit to Japan. In the document, Japan confirmed that, in the event of the UK’s exit from the EU, the Cabinet in Tokyo would work quickly to establish an economic partnership with the UK.813.3.1 Trade
Japan and the EU combined were responsible for around 40% of global trade in 2016. Japan had a significant surplus in trade with the EU until 2012, followed by a slight deficit in subsequent years. Meanwhile, bilateral trade between the UK and Japan has been growing since 2012, with Japan reporting a trade surplus . This trend continued through 2016, when the exit vote took place in the UK (see Fig. 13.5 ).Fig. 13.5Trade flows between the EU, UK and Japan , 2005–2017 (JPY trillion)(Source Ministry of Finance, Japan, http://www.mof.go.jp/ . Accessed 3 November 2017. Own elaboration)According to data published by the Japan External Trade Organisation
eBook - ePub- Irene Antonopoulos, Matt Bell, Aleksandra Čavoški, Ludivine Petetin, Irene Antonopoulos, Matt Bell, Ludivine Petetin, Aleksandra Čavoški(Authors)
- 2022(Publication Date)
- Routledge(Publisher)
Changes associated with Brexit may mean that some farm businesses become non-viable, but this does not imply that the resources they represent will be wasted. Land gets transferred between farmers when exiters leave and, in the UK, it is rarely abandoned. Biodiversity and landscape are more to do with farming systems than with who owns and operates the farm businesses. Over time capital gets reinvested (though in the short term there may be some wastage if previous business decisions were ill-judged). And the ability of farmers, their families, and others in the agricultural labour force to earn their livings is not rigidly confined to the activity of farming. Given their stock of human capital, experience, and abilities (not least in their entrepreneurship and capacity to assess risk), and the sort of supportive communities in which they live, Brexit, while representing for some a threat to short-term income, may for many impact in a positive way and lead to a more sustainable farming community.Notes
- The work of Dr Dylan Bradley, Senior Consultant, Agra CEAS Consulting Ltd in research for the Agriculture and Horticulture Development Board (AHDB), in which the author collaborated, is gratefully acknowledged.
- This effect on prices ceases once imports have been reduced to zero.
References (including studies mentioned in the annex)
- AFBI (2020) ‘Impact on UK agriculture of changes to direct payments following Brexit’, in M. Patton, S. Feng, J. Davis, P. Caskie, E. Sherry, and J. Binfield (eds.) Agri-Food and Biosciences Institute, UK. Available at: https://www.afbini.gov.uk/sites/afbini.gov.uk/files/publications/Final%20Full%20FAPRI%20Report%20with%20cover%2028.09.20.pdf (Accessed 30 September 2020).
- AHDB (2017) Brexit Scenarios: An Impact Assessment. Horizon Market Intelligence, Stoneleigh. Available at: https://ahdb.org.uk/knowledge-library/brexit-scenarios-an-impact-assessment (Accessed 18 January 2021).
- Baldock, D., Buckwell, A., Hart, K. and Maréchal, A. (2017) EU Referendum and Implications for UK Agriculture and the Environment. Report produced for the UK Land Use Policy Group. London: IEEP.
- Berkum , S. van., Jongeneel, R.A., Vrolijk, H.C.J., van Leeuwen, M.G.A. and Jager, J.H. (2016) Implications of a UK Exit from the EU for British Agriculture
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