Should UK leave or stay in EU?
Brexit would have an impact on the UK and the EU in the world. That would be most evident in trade policy. The UK would be likely to strike deals based on the domestic priorities but would have a lower priority than the EU. The impact of Brexit would mostly depend on the relation with EU after that move. Brexit would only happen if the majority vote to leave the EU in a referendum. The outcome is uncertain since there are unknowns, including the outcome of the renegotiation and timing of the vote. There is a need to assess risk, especially for businesses that are predisposed to assessing Brexit from a cost-benefit view. Brexit will have an impact on both the UK and the EU, especially in ten different channels. They include budget, uncertainty, trade within Europe, Foreign direct investment, immigration, liberalisation and regulation, immigration, industrial policy, financial policy, international influence and trade policy. In terms of uncertainty, Brexit can last several years with the uncertainty of the endpoint and the impact it would have on UK businesses. For the EU, uncertainty is bad for business, especially in the political aspect of proving the concept of leaving EU. In terms of budget, the UK is likely to gain financially but that depends on the model employed and the variation of the impact across other UK regions (Irwin, 2015). The EU will lose a great contributor and there is a need to fill the gap by a party with less spending and higher contribution.
UK is the largest FDI recipient in the EU. Brexit could lead to a reduced attractiveness as Europe’s gateway. That can also mean reduced investment for the entire EU, which is the biggest FDI source in the UK. In 2013, the EU was the source of 46 percent FDI stock for the UK. The dependence has fallen over the years with the EU’s share being 53 percent in 2009 (Irwin, 2015). The UK has multiple advantages that would not be affected by Brexit such as light regulation, language, and capital markets. The UK may struggle to attract more investors after Brexit but other EU locations may be more attractive for investment decisions. A poll by British firms confirms that the impact of Brexit is likely to be damaging to FDI, investment intentions. The success of UK in the attraction of FDI projects creates job opportunities and it is a risk for other EU countries if it leaves the EU. Their success depends on whether they will seize the opportunity after losing UK competitiveness after Brexit. The UK might find ways to restore competition in receiving FDI. Further, it might try to undercut EU on taxation and social regulation. In matters of financial services, the UK has a competitive edge but is likely to lose business to provide services to the EU markets. For the European Union, some financial centres can benefit but the business may suffer from an increased cost of financial services and loss of liquidity (Irwin, 2015).
In 2015, the UK shipped 460.1 Billion dollars’ worth of products around the world. That was 2.5 percent of global exports. The top UK trading partners are the United States at 14.5 percent, Germany at 10.1 percent, Switzerland at 7 percent, China at 5.9 percent, France at 5.9 percent, Netherlands at 5.8 percent and Ireland at 5.5 percent (Workman, 2016). UK enjoys massive benefits from being part of the EU and it is likely to continue enjoying most of the benefits after Brexit. However, other EU countries are unlikely to enjoy the benefits they did when the UK was part of them. It appears like the EU needs the UK more. There is no agreement on the estimated effects of EU. Most studies on the impact of immigration have found ambiguous effects on employment and wages and living standards. On the impact of living standards, it is found to be small but positive. The 2008 inquiry found there was a positive effect of 0.15 percent on the GDP of the population. The effects on employment and wages are based on whether there are skills and qualities possessed by migrants. More migrant workers can be said to be direct substitutes for workers. Research finds that immigration does not replace native workers and also does not lower the average wages for other native workers (Thompson & Harari, 2013). The impact of immigration on the UK housing market is dependent on the characteristics and how they compare to the resident population. The impact may be dependent on how likely the migrants can buy homes, rent, or use social housing. The Schengen agreement is one of the greatest achievements in Europe (Heinze, 2015). The agreement allows the free movement of people between the member countries by removing border controls. The agreement brings the countries closer and increases trade, international cooperation, and leads to resolution of disputes. In business, the agreement increased the speed of exchange of goods and services across the borders. It is one of the factors that contribute to EU being a large economic area in the world.
Economic integration is where different countries merge their economic policies over a period of time. The purpose is to lower the trade barriers and economic barriers between the member countries. ASEAN economic community finds that the goal of integration as free movement of services, goods, skilled labour and investment (Allen et al., 2010). Studies of economic integration have mostly focused on investment flows and intraregional trade.
In conclusion, research shows that Brexit would have effects on both the UK and the EU. On UK’s financial status, the impact is uncertain but research shows that the country can survive after this exit. UK’s dependence on EU’s FDI has been reducing over the years meaning it could survive from exiting the European Union.
References
Allen, B., Berry, R., Bloodgood, L., Brady, S., Fry, J., Goetzl, A.,Anderson, M. (2010). ASEAN: Regional Trends in Economic Integration, Export Competitiveness, and Inbound Investment for Selected Industries. Washington, DC: United States International Trade Commission. Retrieved from https://www.usitc.gov/publications/332/pub4176.pdf
Heinze, A. (2015, September 4). European business will suffer if border crossings between European neighbours are shut. Passport to Trade-Business Culture. Retrieved from http://businessculture.org/blog/2015/09/04/european-business-will-suffer-if-border-crossings-between-european-neighbours-are-shut/
Irwin, G. (2015). BREXIT: the impact on the UK and the EU. Global Counsel. Retrieved from http://www.global-counsel.co.uk/system/files/publications/Global_Counsel_Impact_of_Brexit_June_2015.pdf
Thompson, G., & Harari, D. (2013). The economic impact of EU membership on the UK. House of Commons Library.
Workman, D. (2016, March 9). United Kingdom’s Top Import Partners. World’s Top Exports. Retrieved from http://www.worldstopexports.com/united-kingdoms-top-import-partners/
