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Impact of Brexit on the United Kingdom Economy
Introduction
The U.K.s exit from the E.U. also marked a transition in its economic relationship with the bloc. The country intends to shift from close unification and co-operation with its neighbors and keep options of possible reopening opportunities for negotiating direct trade agreements with non-EU member states. The U.K. is the only country to have willingly distanced itself from an economic and financial union of nations. It is also the first to leave the organization after forty-seven years of membership and careful integration in the bloc. This paper aims to discuss some of Brexits economic implications on the U.K.s financial sector, as highlighted in the chosen article.
Main text
Since the Brexit vote, many economists in Europe have tried to explore its consequences on the U.K. economy. Some of the financial considerations have also formed and weighed on the nations legislators minds during the voting on the nations withdrawal agreement. The article, Time Running Out for Brexit Deal, E.U. Seeks to Avoid Jan. 1 Chaos by Steven Erlanger elaborates on the immediate economic effects of the Brexit vote. Before the ballot, the treasury department estimated that a vote on the deal would result in an instantaneous recession (Erlanger, 2020). The central forecast for the Bank of England was for the United Kingdom economy to progress in growth (Erlanger, 2020). However, according to Mark Carney, the banks governor, the plebiscite risks to exit could potentially encompass a practical economic depression, signifying that the financial output would reduce for at least two successive quarters. The report also states that various economic experts perceive an unlikelihood despite being a possible financial impact at the time (Erlanger, 2020). However, the effect is yet to materialize, as the U.K. financial sector growth has been slowing down since June 2016 without undergoing a recession.
The exchequers short-time prediction proved untrue because they approximated that various factors would trigger the recession, which eventually never occurred. Firstly, the department based its assumption on the hope of exiting the E.U. and unreliability regarding how it would happen. They believed that Brexit would lead households and establishments into fear and instant cutbacks on disbursement and another spending (Erlanger, 2020). Secondly, they assumed that the Bank of England would not react to the effects. Therefore, the government would probably reply to the exit referendum by immediately declaring a crisis budget to appraise taxes and slash spending.
The Brexit vote significantly caused a slowed growth of business investments in the U.K. Financial funding in the initial quarter of 2018 was pegged at 2.3% more than during the plebiscite time (Erlanger, 2020). According to Erlanger (2020), various stakeholders and industry experts also suggested that individual businesses withhold potential irreparable investment resolutions until clarity is reached concerning the subsequent association among the E.U., the United Kingdom, and other nations.
Similar to contemporary open economies, complexity continues to dominate the United Kingdoms financial sector. Brexit has impacted the countrys capacity to manufacture and sell services as economists opine that the countrys ability to produce output relies on three essential factors: capital, labor, and technology (Erlanger, 2020). The quantity of a countrys labor usually depends on the number of people, skills, and willingness to work. Initially, the capital was composed of vehicles, machinery, and infrastructure; however, in the current utility-based economies, impalpable capital has become essential.
In terms of technology with regards to Brexit, the article observes that the former continues to modify living standards in advanced countries. Discoveries and inventions, ranging from electricity and large manufacture to improved management operations and paperclips, are essential in encouraging employees to work harder (Erlanger, 2020). Nonetheless, the author argues that producing a commodity without having a defined purchaser is useless. Therefore, the U.K.s economic output mostly depends on the demand for goods and services produced.
The United Kingdom remains an open trading nation-state; therefore, the need is subject to not only how the government, businesses, and buyers want to purchase. Instead, it is also about the number of overseas consumers in the European Union and beyond who want to obtain and the price. According to the article, Brexit and Covid-19 pandemic continues to present complex challenges to Britains economic recovery. For instance, the pandemic has led to the decline of some of the Gross Domestic Products in the United Kingdom and other European economies (Erlanger, 2020). The recovery path remains uncertain despite the impacts being viewed as temporary. Therefore, the author believes that Britains exit from the E.U. means more anticipated changes to U.K. markets with the E.U. and other trading affiliates.
Both the Corona Virus pandemic and Brexit continue to transform labor markets and supply in Britain. According to the article, the unbound movement of people between Britain and the bloc may eventually end. Various financial institutions and firms in the U.K. had already indicated that they would move employees from the U.K. as 2020 nears to close (Erlanger, 2020). The adjustment is seen as part of Brexits implementation plan and readiness for a new regulatory environment in 2021.
Conclusion
In conclusion, the article has explored Brexit as a current economic topic and how it has affected the U.K. economy. The author focused on Brexits fundamental issues by elaborating how they have and may influence the future relationship between Britain and the European Union. As the global pandemic in the form of Covid-19 continues to affect many world economies, the paper has also provided an insight into the relationship between Brexit and the epidemic.
Reference
Erlanger, S. (2020). Time Running Out for Brexit Deal, E.U. Seeks to Avoid Jan. 1 Chaos. Web.
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