The European Union was made after the World War Two to stimulate or promote the economic cooperation with an idea that countries which will trade with one another would most likely avoid going to war with each other.
This collaboration formed a single market which allowed goods and services, even people to move around freely. It seems like the members of the EU works as one state in order to avoid clashes and produce business among the countries which are members. The European Council even has its own currency which is also used in other nineteen countries who are members in EU and has its own parliament which governs in a wide range of area including environment, transport, consumer rights and other sectors as well.
The referendum to exit EU was held on 26 June, 2016.The term BREXIT actually refers Britain leaving EU and the total turnout was 71.8% from which 51.9% voted to leave EU against the remaining 48.1% (BBC, 2016).
However, one of the challenges both countries will face is on trade. As EU is a single market and UK is a member, so there are no taxation forced on imports and exports for the UK till now but after leaving EU, one of the complication that UK will face is the trade taxation. EU is the biggest business partner of UK, so the benefits they both have from one another through trade deals will be jeopardize. UK will also face the challenge which includes the negotiating power with the rest of the members of EU. Hence, the supporters to leave EU says that these advantages will be compensated through the establishment of UK own trading agreements. Furthermore, some of the options proposed by the campaigners stated that as UK is leaving the political aspects of the EU so it would not be bound by the EU laws on justice, agriculture and home affairs but yet could be the member of the single market.
Adding on, the economic effects of leaving the EU for UK are discussed in facts and moulded in paragraphs for better understanding.
Currently, the advantage lies within UK as it has a free trade system with all the 28 countries who are EU members. The percentage of trading accounted with the EU was 44.6% of the UK exports and similarly 53.2% of the UK imports of goods and services. If UK leaves EU it will result in 1.3% fall in average UK income and through a pessimistic approach with increase in trading cost, Brexit will lower incomes by 2.6% (Swati, 2016). If UK will leave the EU then it will also loose the negotiation on trade deals with these countries which could result in effecting the UK export industry. From another point of view it may be able to lower EU external tariffs as the EU imposes some significant external tariffs on goods such as agriculture which results in increasing the price of some imports of food products. If the UK leaves the EU it might be able to arrange better trade deals with the other countries, despite to some emerging economies such as China and India which are already having impact on the EU world trade graph.
Secondly, as being a member of EU for so long, UK has made lot of investments in EU and earns revenue from them. Similarly many European companies have invested in UK but due to Brexit these investments may become less charming or appealing as it will force the foreign investors to go back to EU. For example, BMW Company has already warned their workers for the potential job losses in case Brexit happens. The exchange of assets investment between UK and EU are around 89.6% but the uncertainty about Brexit has resulted into 9.9% depreciation of pound as compared to dollars. Whereas, sterling has risen by 3.6% (Oxford,2016). If only both can shake hands on some mutual successful post leaving treaties, it might then can save the investments on both sides. Another alternative solution for UK is to make a European Economic Area (EEA).
Thirdly, another issue which UK faces is the exchange of workers between EU and UK. It has generated notable stress on areas such as housing and infrastructure. Migrants who come to work from EU also contributes in the economy by filling out labour shortage gaps in areas such as nursing and teaching. So if the UK leave the EU it might lead to the immense shortage of labours as in 2016 there have been some firms who are outlining the labour shortages, especially in areas such as agriculture and construction. If UK leaves, they will gain the advantage of restricting net immigrations but on the other hand it will be difficult for UK nationals to find work abroad. According to the record, there are 2 million British nationals who are currently working in EU. Similarly according to the survey by (RICS) around 176,500 people who are working in UK from different parts of the EU will be jeopardized as well (Guardian, 2018).
Furthermore, the basic and main problem for UK is the decline of the inward investment which UK receives from the EU. Currently the value of Pound has been fallen from 10 to 15 percent showing the negative impact on the economical condition in a longer run for UK. Nevertheless, the particular problem of the decline in Pound is due to the low wage growth which has risen cost push inflation. In future if the current scenario continues it might also trigger an economic downturn for UK.
If UK leaves the EU, even then it has to pay the EU to able itself in taking benefits from the single market. Around £17bn was paid to EU from UK which is approximately 0.6% of the total GDP. IF UK leaves EU, then EU will not grant UK to have benefits of the single market. According to EC the net contribution of UK to EU is $7.1bn and as a percentage of the GDP the membership cost including the money which return to UK is 0.4% (Hannan, 2009).
The waste of resources is due to the inefficient agriculture policies between EU and UK. According to the records the EU, despite years of reform paid a high volume of its budget on agriculture in 2013 which was around 43%. If the UK leaves EU, then it will allow UK to make its own agriculture polies on its own terms and conditions and would not be subject to EU policies in future. Although, UK still have to make some amendments in the policies with other countries on issues such as fishing, environment and pollution.
United Kingdom will be able to cut of the European Union regulations once UK leaves the EU. Nevertheless, still to trade with EU in future the companies will need to match the standards of EU on environment, health and etc. It is also have been said that the biggest cost is not due to EU regulation but is because of the UK’s planning regulation which can also have beneficial social effects such as battery safety standards and reduction in excess energy use.
Although there are many reasons for the decline in UK’s productivity and investment and one of them also includes the poor performance which led to the economy downfall. In any country, productivity is a key element for the economy to grow and therefore tax revenues. UK’s economy has not been much better since 2009 due to several reasons which can be determine due to global fall in productivity, low investments in technology, effects of fiscal austerity and low wage growth and mainly due to the uncertainty over Brexit issue.
In the coming years, there will be an impact on the UK’s economy due to Brexit. However, it also depends on the trading deals and policies UK will make in future to fight with such challenges.
The Royal Institute of British Architects (RIBA) proposed five challenges and five opportunities faced by UK after the referendum to leave EU. RIBA is an organisation which has made a policy document which offers solution to the UK government and focuses on how architecture’s contribution can help in the growth of the economy.
FIVE CHALLENGES:
- As UK has one of the world class architectural sector, government must emphasize on the open market promotion, at home and abroad. It is easier to get finance for business especially for the small and medium size enterprises.
- As architecture is a skill full and innovative profession so the government must ensure to maintain the creative sectors.
- UK and EU should maintain and arrange mutual agreements for the Architects in other large markets
- UK must sustain affordable EU product supply and ability to specify product standardisation.
- Research funding should be retained more than ever for assuring access to high quality education which will play a vital role in the success of UK’s economy with respect to the skill gaps in the construction and design industry.
FIVE OPPORTUNITIES:
- Mould new research and commercial partnerships by proposing better and new trade agreements. The government should mould the new agreements which could result in the betterment and the UK tradesmen can add value by investing in Asian countries who are experiencing rapid urban growth in infrastructure investments.
- To strengthen the UK economy, the government should ensure that the spending on UK’s rail, road, air and telecom networks should be made in order to match the world class infrastructure.
- To gain advantage in EU and overseas the government should also negotiate and focus on the exchange of educational qualifications with its key partner countries.
- Government should make sure that the policies should be designed in such a way that should benefit the small and medium size enterprises in the public sector.
- To bring down costs and to meet standards the government should use value added tax flexibility to increase construction.
The President of RIBA, Jane Ducan stated:
“UK architecture is a flexible and innovative profession and with the right actions taken to address the challenges and exploit the opportunities we’ve outlined today, I’m confident UK architects can deliver strong economic growth, and the buildings and spaces that meet the needs of our communities”(RIBA,2016).
According to the survey in 2014, the total non-UK nationals were 5.3 million from which 2.9 million were the EU nationals and of those 2.2 million are currently working in the UK. Moreover, relation between EU and UK in future can be politically described as EU is not just a group of states which unites and cooperate with each other, but it’s a group of states who have authorities over judicial and executive decisions through creating a supernatural institutions. It can be seen as one of the most noticeable factor, as the European Court of Justice can overrule national jurisdiction and similarly European Parliament with the Council can effectively replace national laws by offering new laws. Majority of British electorate have claimed rejection over these supranational exercises and it was significant that the UK has rejection on one of the elements of the single market. Furthermore, the relationship which both EU and UK seek to have would be based on intergovernmental form of collaboration. This means there will no legal rights of free movements in the labour sector but through a controlled labour mobility plus a contribution to the EU budget. The main purpose of such proposal is to continue the cooperation on matters of common interest. Talking in an interview to The Guardian, Theresa May stated:
“The future framework for our relation with the European Union clearly identifies that we will have an independent trade policy and we will be able to do negotiable trade deals with countries around the rest of the world”(BBC,2016).
One of the biggest worry for EU is the effect of Brexit upon its pharmaceutical industry. European Medicines Agency (EMA) which was based in London since its foundation in 1995, will have to relocate there headquarter from London to any other 27 remaining member states of the EU. EMA which runs the EU centralized system for approving new medicines and also act as a regulatory body of national competence authorities (NCA) and is also responsible for licensing and regulating drugs in each member state. However, the EU was hoping to minimize the threat by slowing down the transfer process over a phased transition period of few years along with the gradual withdrawal of UK from the EU which supposed to start from March, 2019. In this way UK would have continued to assist the agency’s operations and also would help in publishing the key documents such as guidelines. Unfortunately, the agency plans to relocate the headquarters quickly which will result in the complete break between EU and UK in March, 2019. Countries such as Denmark, France, Italy and Spain has shown their interest in order to host the EMA headquarters.
Although, Brexit will lead to a substantial negative effect for UK, Theresa May is making sure that her government assures to introduce lower cooperate tariffs rate in order to keep the flow of the investment coming and also adopting a new strategy of banking deregulation in 2019. The major problem for the UK is to secure British people’s obdurate social and economic rights. The module of European charter of fundamental rights can be adopted and kept in UK which could assure the protection for all the British people and those who are living within the United Kingdom. The signed document of European Convention of Human Rights since 1990 has been in the statue book of UK in order to protect and secure people’s right whether they are at home, office or fighting against discrimination or fair. UK should not just dwell on focusing at the ideological vision but should also give priority to its ordinary people. Therefore, UK needs to build some sort of rational or cogent frame of system which could work for both EU and UK and could act as an economic bridge. In future, the economic consequences will be measured by the policies made by UK depending upon what policies UK actually adopts after leaving EU. The reduction of unification with EU countries which resulted in lower trade will also cost UK more than it has gained from contributing in to EU budgets.
The terms of UK’s exit has been finalised and the terms of the future relation between UK and EU has also been taken in concern. After the Parliament’s approval for the bill which was made after the result of referendum in 2016, the government will then introduce the EU withdrawal bill. Moreover, this bill will also have some effect on the UK law as agreed which includes the protection of the people rights during the operation of the implementation period. Before leaving the EU, both UK and EU officials will sit together in order to discuss the future arrangements so that the relation of new kind could start straight away immediately after the exit of UK from EU. These talks will guide both side officials to elaborate the instructions of new terms and conditions which will be followed by the implementation by the end of 2020.
7.12.2018