Economics is a subject which is quite interesting and deals with current as well as past situations of a country.
Students applying for this course in college or postgraduate programs have to go through vast information to score well in their exams and assignments.
One of the most essential topics where students like you might struggle writing a paper is on recent topics.
A vital reason for this problem to surface is that there is too much information available on it, which will overwhelm you. You won’t know which information is correct or which is exaggerated.
Hence, to help pupils like you this blog will talk about Brexit and how it has affected economy of the United Kingdom.
What is Brexit?
It is simply that UK left the European Union’s membership. The term Brexit stands for British Exit from the European membership.
This took place after 51.9% of the people voted for this decision.
Now you can understand how much changes will take place in the country’s economy due to this decision. Every sector will be affected in a different way.
Have a look at it in detail!
Companies leaving UK
According to various reports throughout the world, numerous organizations are moving all of their business onto other places of this continent primarily Luxembourg.
However, the ideal topic/question of discussion is not whether these companies will move to but where and when.
After a lot of discussions, even various supporters are fully convinced about positive aspects in trading after Brexit.
Various companies rely heavily on supply-chain that Europe offers. Such company includes Airbus which warned that if there is no deal then they would have to forcefully relocate.
Moreover, this company moving their manufacturing plant somewhere else means that it will directly impact employees the number of which crosses 13,000 at least.
Also, it is further estimated that more than 100,000 people will be out of jobs from the Airbus suppliers.
Now imagine, this is the data for one company moving out of the UK due to Brexit. What will happen when several large corporations like this move out?
Effect of Brexit on economy and trade
Most economists believe that UK, being a member of European Union has a massive positive effect on trade. So, leaving EU would affect the trade hugely and have a negative impact.
Numerous leading economists’ surveys provide data which shows that Brexit will most probably even reduce per capita level of income in the UK.
A survey was done in 2017 found that in the long run, this might make the UK poorer as it structures a barrier which will affect trade massively along with immigration and direct investment from foreign countries.
However, there is no certainty of how large this effect can be. But many believe it might cost ranging somewhere between 1-10% of per capita income of UK.
You should keep in mind that these estimates might differ depending on whether UK plans of staying in Single Market by joining EEA.
Also, a lot depends on whether UK makes a trade agreement with EU or return to trade policies which govern relationships between every WTO (World Trade Organizations) associates.
Even prior to this referendum, UK’s treasury believed that it would be bad for UK’s trade if they leave EU.
Institute for Fiscal Studies on August 10, 2016, published a statement that warned there might be difficulties which United Kingdom might face if they stop being a member of EU as they will also stop receiving all benefits from this membership.
IFS claimed that cost of lessening economic growth would amount to £70 billion which is more than £7 billion membership fees’ savings. New trade deal would make up this difference is something it didn’t count on.
Chief Economist Andy Haldane along with Bank of England’s Executive Director who handles Monetary Statistics and Analysis stated that this bank’s own forecasts show immediate downturn economy as referendum result was not correct.
Also, they noted a strong performance of market after the referendum. However, many have pointed it out that prices are rising much faster than the wages of people.
Haldane explained that the forecast was inaccurate in an assessment of its near term and that Brexit over time would massively hard UK’s economic growth.
London School of Economics presented a report that suggested food prices, especially of dairy products, will rise and also food supplies might be scarce if Britain opts to leave EU under trading arrangements of WTO.
Also, another aspect to keep in mind is that hospitals at present times rely heavily on imported food from EU as it offers best nutritious diet.
Hence, there is a concern that how much healthy these diets will be which are offered in prisons, hospitals, care homes, and schools if UK leaves EU without a proper agreement.
Investment from foreign
World Pensions Council’s European professionals and University of Bath’s experts have debated those economic prospects of Britain for long term will remain high when it will come to FDI (Foreign Direct Investment) and country attractiveness.
UK’s risk experts believe that economy of UK will remain strong if it finally decides to leave EU. Britain’s Economic attractiveness will not diminish under such circumstance.
University of Bath’s lecturer Bruce Morley explains that long term perks of UK leaving EU means less regulation along with more control on trade policies might outweigh short term issues or uncertainty which was observed in various scores of country’s risking tests.
The debatable importance of UK being a member of EU as FDI’s lure is something stressed by supporters of UK staying as a member of the European Union.
So, in this regard, various foreign firms use UK as gateway to multiple other markets of EU.
From it, UK’s economy benefitted from the resulting attractiveness for activity due to its location. FDI’s major recipient is UK without a doubt.
It held second-biggest stock in 2014 of worldwide inward investment. This amounted to over £1 trillion which is almost global total’s 7%. It was 3% more than the double accounted for by France and Germany.
Also, on the basis of per capita, UK happens to be forerunner among various major economies that have an FDI stock which is three times bigger than other vital European economies. Also, from US it is 50% larger.
Currency and stock market
FTSE went down to 5806 from 6338 when London Stock Exchange started its daily operation on 24 June. This happened in first 10 minutes and then recovered to a 6163 before trading day’s end.
This totaled a fall percentage of 3 and then when markets opened again on Monday it kept declining at a steady pace which made 2% loss before afternoon was over.
After referendum, Dow Jones Industrial dropped about 450 points which is more than 2% that occurred within half an hour.
Associated Press called this decline in global stock market a crash. Also, internationally, wealth of around US $2 trillion in market equities sold out in a day which was a record.
By June 27, stock market’s total loss amounted to US $3 trillion dollars. Also, by this time FTSE lost more than £85 billion.
Also, during the time trading was closed on the same day FTSE which focused domestically was approximately down 14% when compared with results from days before referendum outcomes were published.
However, you should also keep this in mind that FTSE raised above levels of pre-referendum by July 1.
When previous fall was taken into account, it represented index’s single week largest rise since 2011. Also, on July 11 it entered the territory of bull market officially which was result for it rising to 20% or more.
In United States, S&P 500 which was broader market than Dow Jones also reached an all-time high.
On June 24, pound sterling suffered as it fell lowest when compared against US dollar. It went down 10% when compared against USD and more than 7% when calculated against euro.
In history, dropping value to $1.36 from 1.50 was by far the largest that happen in just two hours. Moreover, the pound stayed low and it was dubbed worst performance of a currency that year when calculated alongside 31 different major currencies.
Referendum results had an instant effect on various other countries too. For example, rand of South Africa went through massive decline in a single day since 2008. It’s value dropped by 8% when calculated against USD.
Other countries which had a negative effect due to this was Canada; its stock exchange suffered by 1.70% along with Kenya and Nigeria.
This took place because of the shift in global finance due to currencies was seen risky which went into USD.
Apart from it, partly it took place due to UK’s withdrawal from European Union concern as it was believed to affect economies along with countries’ trade relations which have links to UK’s economy.
However, by 2016 September, British journals reported that FTSE has broken all records and reached highest points in months after referendum was published.
In July of 2016, IMF published a report which showed that Brexit might be a risk that declines global growth.
Also, considering current uncertainty about the process of UK leaving EU makes it quite possible to the fact that there might be huge negative outcomes that might grace United Kingdom.
In 2018’s September, IMF also remarked that this British Exit might entail cost but disorderly leaving my result in an outcome that is significantly worse than people are expecting.
Some projections ascertain that timely agreement in a proper way with EU regarding the pact of free trade would make Brexit process smooth after that. However, if departure is disruptive then outcome is bound to be worse.
Christine Lagarde said crash or disorderly British Exit would have several results that include growth hindrance, sterling depreciation, also a deficit of sterling, etc. which may cause UK’s economy’s size to reduce.
She also added that larger impediments in new trade relationships will be costlier. When it was asked that whether she see any positives when it comes to Brexit to which she answered that she sees a lot of negatives.
However, if these uncertainties would be removed then it would definitely be better. She stated that so much uncertainty is not good for any economy.
BBC reported that JLL Company which is firm that invested in property showed data that Asian investors include 28% of accounting for transactions in this market which was up from 17% year before Brexit was indicated.
This shows that it doesn’t dissuade property investors who are Asian.
Apart from these, there are certain other sectors like financial institutions, economy, and business, etc. also which might be adversely or positively be affected.
However, the uncertainty changes the game. Due to so much uncertainty still existing, no one can be sure of anything that might take place after Brexit.
For the exact results, people need to wait and see if Brexit happens and then only consequences can be measured.
Now you can understand why students like you might have problems writing papers on topics like this. These are current topics which one will have to write about it when opting for an economics program.
So much information floating around internet and only presenting valuable data is quite difficult. This is the reason as to why pupils often find themselves in a dilemma when trying to complete such a task.
This is why discussion with professors, classmates, private tutors, parents, etc. is essential to writing a remarkable paper and submitting it on time. When it comes to current topics like Brexit and its effect on UK’s economy information is key to having the best work in your class.
Now you are completely aware of Brexit and how it might positively or adversely affect the United Kingdom’s economy in the long and short run.
Nancie L Beckett is an amazing tutor and researcher who helps students with their papers so that securing remarkable grades becomes easy. She completed her MBA from UCLA Anderson School of Management. Also, she has over six years of experience in this field which scholars find very useful when going through her papers.