Discussion
The United Kingdom’s withdrawal from the European Union is described as “Brexit”. It is the abbreviation of exit of Britain from EU. This study has highlighted the economic aspects of Brexit between European Union and United Kingdom. In this context, capital economics has been commissioned with the help of Woodford Investment Management in order to measure the association of United Kingdom with Europe and the effect of Brexit on the British economy. In the referendum, it can be identified that 51.9 percent votes were casted for Brexit, whereas the rest votes were casted for remaining in European Union (Barrett et al. 2015).
After Brexit, it can be observed that annual net migration from Europe would be doubles from the year of 2012, and it would reach to 183000 in the year of 2015. This would in turn boost up the workforce by the amount of 0.5 percent in a year. This would improve the wage rate, inflation rate of the country (Begg and Mushovel 2016). As per the official trade statistics, it is known that European Union is the destination of half of the British goods exports. The trading links would be bigger if the countries would be able to participate in the free trade with the European Union.
In order to discuss the economic relationship between European Union and United Kingdom, it is necessary to identify the trading condition, rate of interest, rate of inflation and the unemployment rate of each of the single markets of European Union. According to Dagnis Jensen and Snaith (2016), the United Kingdom has planned to provide a formal notice to leave the European Union in March. After Brexit, the United Kingdom would also offer a free trade deal with the single markets of European Union. In this context, Busch and Matthes (2016) opined that the free trade with the countries of EU would make the negotiation easier. On the contrary, de Mars et al. (2016) argued that it is not possible to make a free trade deal with the countries of EU within this short period. On the other hand, it can be observed that the United Kingdom and the companies sell the products to the consumers anywhere in the European Union, without those of the consumers have to pay extra taxation in order to import the products. British customers and the organizations also import the goods from United Kingdom without tariffs. This refers that the European Union also makes the agreements in order to allow free trade with the nations (Kostovicova 2016).
The United Kingdom would likely to negotiate the free trade agreement, however, the trade off is based on the speed and scope of the business. As European customs Union and the common commercial policy, the United Kingdom is not eligible in order to communicate the own trade association with the non-members nations. On the other hand, the free trade agreement with the European Union, 63 percent of Britain’s products exports are associated with the European Union membership (Matthews 2015). It is highly expected that the trade agreement would reach after Brexit due to the benefits of both sides in order to continue the closer commercial arrangement. Therefore, the exporters would get some additional costs. Nevertheless, these determinants would be inconvenience than the major barriers to trade.
McGrath (2016) opined that the effect of UK trade with Europe would depend on the connection between the UK and EU after Brexit. In addition, it can be mentioned that FTA based association and the regulatory divergence would focus on the cost of trade in order to improve over time. This would also damage the bilateral trade quantity and the position of United Kingdom within the European supply chain (Beaumont, Walker and Holliday 2016). Moreover, it can be mentioned that as per the statistical data of 2015, United Kingdom exported £ 133 billion worth of products to the other parts of EU. This is equivalent to the half of the exports of global goods. Nevertheless, it can be expected that United Kingdom will incur loss by £ 4.5 billion in the next year if Britain leave EU without associating a new trade agreement after Brexit (Purdue, Huang and Economics 2015).
This EU-UK trading association is fuzzy, however, Northern Ireland is at the vulnerable position. In the comparison with the other counties of European Union, it can be mentioned that trade relationship with Northern Ireland refers a distinct composition along with a higher dependency on the republic of Ireland. It is noted that the trading condition of Northern Ireland is different from the rest of the counties of European Union. Simionescu (2016) cited that the indicator of trade openness is the ratio of region’s overall trade compared to the gross domestic products of the country. This proves that the position of Northern Ireland is average after Brexit under England but above Scotland. The government of United Kingdom has planned to hold a referendum on the membership of European Union in the year of 2016 (Stosic-Mihajlovcc and Zdravkovic 2016). It is known that Northern Ireland products trade with the EU is aimed to the textiles, agri-food and transportation and the other manufacturing sectors. Therefore, the employment connected with the Irish manufacturing sector would be increased. Retailing and the wholesale sector of Northern Ireland would be developed after Brexit. Stosic-Mihajlovcc and Zdravkovic (2016) cited that the farmers of the Northern Ireland would have to pay extra 40 percent tariffs and therefore, the country would be affected in case of exporting of dairy products. On the other hand, they are also not willing to import milk from United Kingdom due to higher import rate. As a result, it can be inferred that the money supply of United Kingdom would be reduced (Simionescu 2016).
This study had highlighted the effect of Brexit on the businesses of European Union. In this context, it can be mentioned that Brexit has a negative impact on the businesses of EU. According to Dhingra et al. (2016), after Brexit, the businesses of European Union would be less competitive. In this context, it can be mentioned that the costs of the products will be increased after increasing the tariffs. As per the business analysis of 2015, it can be observed that United Kingdom has contributed £ 13 billion to the European Union Budget. Therefore, it can be mentioned that the net contribution is approximately £ 8.5 billion each year.
The small businesses of European Kingdom would also be affected. As opined by Beaumont, Walker and Holliday (2016), the government of United Kingdom has highlighted that the revenues of small businesses would be decreased. The manufacturing sector achieved a growth due to the fall of pound, and therefore, weaker pound would not be benefitted for the businesses. Shah and Mann (2016) added that smaller businesses are highly vulnerable to shocks as the field of organizational function is comparatively smaller. Moreover, it can be added that the smaller business also faced the problems regarding getting of loans like the large businesses. Therefore, the profitability statement would be decreased after Brexit (Purdue, Huang and Economics 2015). On the other hand, it can be mentioned that reduction of the rate of GDP also reflects the difficult position for the smaller organizations in case of making of import from the other countries. For example, it can be mentioned that the subsidiary firms would struggle to keep up the business.
As per the statement of Lim (2017), it can be mentioned that after Brexit, the rate of interest would be decreased from 0.5 percent to 0.25 percent. Therefore, the countries of European Union would suffer from financial crisis. This would increase the monetary policy of the countries. On the other hand, the countries would start a new quantitative easing and the buying of governmental securities would grow the bank lending more by funding the landing scheme.
After Brexit, the countries of European Union are suffering from lower unemployment rate, consumer spending, increasing of house prices. On the contrary, Begg and Mushovel (2016) criticized that worries are increasing for 2017 as the signs highlights that after Brexit the vote’s blow about the pound is stoking the inflation rate and also increase the spending power. On the other hand, Busch and Matthes (2016) made a counter argument and stated that inflation rate would be higher than the predictions of the economists. This would in turn increase the standard of living of the country.
Moreover, the household’s budgets would be squeezed in terms of higher prices within the coming year. After the exit of Britain from European Union, the growth of the wage rate would be remain same and the unemployment rate would be lower. This refers that the employment opportunity would be increased after Brexit as well as making the free trade agreement. This would in turn increase the economic situations of the countries of European Union after Brexit would be improved. The GDP rate of the countries would be increased.
In the opinion of Dagnis Jensen and Snaith (2016), at the post Brexit period, Northern Ireland would suffer from the situation of recession. Therefore, the unemployment rate would be raised in Northern Ireland. Therefore, the economists would like to push the social welfare rate of the country. After Brexit, it can be added that the rate of unemployment rate of Northern Ireland would be 7.8 percent. This would in turn refer that the income per person of the economy would be decreased. In addition, higher unemployment rate of would decrease the wage rate of the employees.
On the other hand, the rate of inflation of Northern Ireland would be decreased from 2011 to 2015. The rate is decreased from 2.6 percent to -0.3 percent. Over these five years, the inflation rate has decreased. Therefore, it can be stated that Northern Ireland would suffer from deflationary situation. In the words of Kostovicova (2016), the price level of the goods would be lower. As a result, the rate of unemployment also decreased.
According to Matthews (2015), it can be mentioned that at the post Brexit period, net European Union budget contribution of 0.33 of the gross domestic product percent would improve the trade barriers. This would improve the nation’s gross domestic products by 1 percent. Based on these new economic agreements of United Kingdom with the European Union, UK would suffer from loss between the ranges of 1.5 percent to 9.5 percent of the gross domestic products of the countries (McGrath 2016). This would hit the Britain’s GDP due to the causes of spillovers to the global and the regional markets.
Conclusion
This study has highlighted effect of Brexit on the economic relationship with the countries of European countries and also with the Northern Ireland. In this context, this study ha highlighted the trading situation of the countries, how the exit of Britain affects the export and the import of the markets of European Union and Northern Ireland. After analyzing this study, it is known that the countries of European Union made a free trade agreement with the United Kingdom. This would boost up the countries trading situations. However, the farmers of Northern Ireland had to pay addition 40 percent taxation in case of making trade with United Kingdom after Brexit. In case of import of milk products from United Kingdom, the Irish farmers would be decreased. On the other hand, the unemployment rate would be decreased after Brexit in the countries of EU. On the contrary, it can be mentioned that the unemployment rate of Northern Ireland would be increased. As a result, the per wage income of the employees would also be reduced. In addition, it can be mentioned that the rate of inflation would be decreased from the year of 2011 to 2015. Most importantly, Northern Ireland has been suffering from the situation of recession. This would reduce the growth of the country’s economy.
References
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