Posted on June 29, 2019

After Effects of Brexit

Brexit is the word short for ‘British Exit’ and the word is commonly used for the United Kingdom leaving the European Union. It is due to a referendum by the citizens, held on 23 June 2016 where the United Kingdom leaving votes won by 51.9% to 48.1%. After two years of exit processes, the United Kingdom leaving the European Union was due on 29th March 2019 but the agreement was rejected thrice by United Kingdom MPs. European Union leaders have now backed a six-month extension having granted an initial extension of Article 50 until 31st October 2019. Here’s how Brexit will affect the European Union and the United Kingdom itself. pexels-photo-1679618

Trade Within Europe

action-bike-city-2144298 IMPACT ON UK – The impact of trade between the two depends on the relationship between them after Brexit. Either the Swiss model or an FTA-based relationship - regulatory divergence grows over time increasing the cost of trade, impacting on volumes and the UK place in supply chains. IMPACT ON EU - Post-Brexit outcomes which reduce trade or increase the cost of trade between the UK and the rest of Europe will be damaging for both sides. EU trade matters more for the UK than UK trade for EU but UK demand is very important in macro terms for many EU countries.

Foreign Direct Investment

adult-banking-blur-1288483 IMPACT ON UK - The UK is the largest recipient of FDI in the EU. Brexit could reduce the attractiveness of the UK as a gateway to Europe, as a base for corporate HQs and as a location for investment from Europe It could also result in a discount in investment from the rest of the EU, which is the biggest source of FDI in the UK. IMPACT ON EU - Many large European corporates are heavily invested in the UK and the commercial logic for this investment could be affected by Brexit. Businesses realize it expensive to relocate investment from the united kingdom and there's a risk the united kingdom tries to undercut the EU on standards to draw in FDI.

Liberalization And Regulation

pexels-photo-1051449 IMPACT ON UK - The UK has championed the single market, but outside the EU would no longer be an effective advocate of further liberalization. A paradox following Brexit the UK would lose influence over EU regulation without gaining much freedom to regulate independently. IMPACT ON EU - After Brexit, the balance in the European Council on economic policy debates would shift, with the loss of a large member state supporting liberalization. Germany, particularly, would find it harder to assemble a blocking minority or to act as the swing state in regulatory debates.

Immigration

adventure-blur-cartography-408503 IMPACT ON UK - Immigration is tightened, damaging competitiveness, particularly of London, but how much depends on the Brexit. This risks damaging competitiveness, particularly of London, and being economically costly. IMPACT ON EU - Changes to the labor supply and the flow of remittances will impact on some countries. Perhaps the biggest risk, however, the toughest to predict is of ‘political contagion’ elsewhere in Europe if the united kingdom tightens border controls.

Industrial Policy

books-document-education-357514 IMPACT ON UK - UK industry benefits from research collaboration in Europe and researchers have done well in EU competitions. While the UK would gain flexibility over industrial policy outside the EU it would lose the benefits from scale and influence over policy in areas such as energy. IMPACT ON EU - The impact on industrial policy in the EU depends on the Brexit model, but the weakening of competition policy, looser collaboration in education and research and impacts on public procurement can be notice41d. Thus, Brexit, if voted for, will have damage the economic conditions of the European Union and further on would result in political instability. This would be harmful to both the sides and would result in only loss and no winners.

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