Economic Consequences Of Brexit

746 Words 3 Pages
After World War II, the European Cooperation was established with the initial goal of preventing future conflicts between neighboring countries and to secure peace in Europe by making the member states mutually interdependent. Common policies, the creation of a single market and the introduction of a single currency led to an expansion of the economic and political cooperation. The result of this development is today’s European Union (EU) with 28 member states.
Due to increasing Euroscepticism in Great Britain, a referendum about the country’s EU membership was held on the 23rd of June in 2016. The referendum
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Firstly, the paper explains the main potential consequence of the Brexit and its causes. Secondly, it examines the importance of trade between the EU and Great Britain and the effects of the referendum on the trade relationship.
One of the main potential economic consequences of Brexit is an economic slowdown. After the referendum in June, the country has experienced a fall of its currency. The pound has decreased by almost 15% compared to its value before the referendum. This is the lowest point of the British currency since 1985 (www.independent.co.uk).
On a global scale, the currency devaluation has led financial markets to sell of their assets to more stable currencies such as the dollar. Due to the fall in currency, British exports are more competitive on the foreign market but it also implies that imports have higher prices (www.economist.com). Consequently, living costs might increase followed by a potential decrease in consumer spending which would have a negative effect on the
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Companies who are dependent on imported inputs for the further processing of their goods will gain less profits and are less competitive on the market. Thus, small and medium-sized businesses might go bankrupt and jobs will get lost.
To add to this, Great Britain will not only lose economic benefits and further growth opportunities from trade with the EU but it will miss out on further trade agreements between the EU and other countries such as the Transatlantic Trade and Investment Partnership. This would imply that Great Britain has to negotiate trade agreements by themselves with other non-European countries. However, this might turn out to be difficult due to having a low bargaining power in comparison with an economic union such as the EU.
In conclusion, it can be said that potential consequences of the Brexit are mostly negative for the country’s economy. It is difficult to be precisely predict the outcomes since there is a high uncertainty about what kind of relationship the EU and Great Britain will agree on. Whether the country will agree on giving up access to the single market or whether it remains in the EU’s customs union has a crucial impact on the country’s economic

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