Is a hard Brexit economically better, or should it be tried to retain the existing economic relations as much as possible? What economic and political impacts will the Brexit have on the United Kingdom and on the European Union? Finding the right answer to these questions is incredibly difficult, since it is still unclear how Britain and the EU will regulate their relations when Brexit takes place; hence, all critical evaluations of the consequences can only be based on assumptions.
By answering these questions, I will show that Brexit is most likely to harm the English and European economies. This is independent of whether a soft or a hard Brexit occur. However, it should be mentioned that at the time of writing this master thesis, the shape of the future EU-UK relations is unclear.
The United Kingdom (UK) joined the European Community in 1973. Only two years later, there was a first referendum in which the British voted on the membership in the Community. Sixty-four percent of voters used their voting rights, and 67 percent of these voters spoke in favour of remaining in the European Community. Since then the British have seen the European cooperation only as having added value in the single market, but the goal of a political union has remained foreign to them.
Due to the pressure of the UK Independence Party (UKIP), England’s right-wing political party led by Nigel Farage, on British Prime Minister David Cameron to hold a referendum on the membership of the EU, Cameron criticized in his speech at Bloomberg in 2013, among other things, the high level of debt or declining trust in Europe’s institutions. The British feel deceived by the European Union, as it draws more and more power and concludes new contracts without responding to the interests of the United Kingdom.
Many residents of Britain wonder, as Cameron reports, why they cannot have their only reason for entering the EU, namely, a common market. The main purpose of the European Union is to ensure wealth. The EU is only a means to achieve affluence, democracy and stability. Britain is characterized by independence and openness, as well as by the passion of its people to defend their sovereignty. Cameron announced that there will be another referendum on the disposition of the UK in the EU.
Table of Contents
1. Introduction
1.1 Background Information
1.2 Structure of This Work
2. EU Referendum
2.1 Who Has Voted
2.2 Article 50 of the Treaty on the European Union
3. Differentiation between Soft and Hard Brexit
3.1 Soft Brexit
3.2 Hard Brexit
3.3 Advantages and Disadvantages
4. Current Status of the Negotiations
5. Political Implications
5.1 Fear of Further Withdrawals
5.2 Consequences for British Regions
6. Economic Consequences
6.1 Monetary System
6.1.1 The Brexit Bill
6.1.2 Banking and Financial Sectors
6.2 Migration and the Labour Market
7. Trade
7.1 Trade in Goods and Services
7.2 Trade Restrictions
7.2.1 Tariffs
7.2.2 Non-Tariff Barriers
8. Welfare Effects
8.1 Review of the Literature
8.2 My Structural Gravity Model
8.2.1 Data
8.2.2 Results
9. Conclusions
Objectives and Topics
This master thesis investigates the potential political and economic consequences of the United Kingdom's withdrawal from the European Union (Brexit). The central research question examines whether a hard Brexit is economically preferable or if it is advisable to maintain existing economic relations as much as possible, while evaluating the impacts on both the UK and the European Union.
- Analysis of different Brexit scenarios (soft vs. hard Brexit) and their implications.
- Evaluation of political consequences, including withdrawal precedents and regional stability in the UK.
- Assessment of economic impacts, focusing on the monetary system, financial sectors, and trade relations.
- Examination of migration patterns and labour market effects resulting from the transition.
- Application of a structural gravity model to estimate trade flow changes and welfare effects.
Excerpt from the Book
1.1 Background Information
The United Kingdom (UK) joined the European Community in 1973. Only two years later, there was a first referendum in which the British voted on the membership in the Community. Sixty-four percent of voters used their voting rights, and 67 percent of these voters spoke in favour of remaining in the European Community. Since then the British have seen the European cooperation only as having added value in the single market, but the goal of a political union has remained foreign to them (Möller, 2016).
Figure B. 1 in the appendix shows the chronological course of how the British rate their membership in the European Union (EU). Apparently, the number of citizens who consider the EU membership to be detrimental varies, but it increases over time; hence, they become more disappointed by the EU. In contrast, the number of those who said that the EU membership is a beneficial thing decreased. The alignment started in mid-1992. This can be explained due to the signing of the Treaty of Maastricht on 07 February 1992, which came into force in 1993. This treaty led to the establishment of the European Union and laid the foundation for a single currency, a common foreign and security policy, and a closer cooperation in the fields of justice and home affairs. Great Britain insisted on an opt-out option in the common currency and social-chapter matters. As a result, the UK had politically demarcated from the EU and adopted a special status (European Central Bank, 2017).
Summary of Chapters
1. Introduction: This chapter provides background information on the history of UK-EU relations and outlines the structure and approach of the thesis.
2. EU Referendum: This section covers the 2016 referendum, including voter demographics, political reactions, and the initiation of Article 50.
3. Differentiation between Soft and Hard Brexit: This chapter explores definitions of soft and hard Brexit, along with alternative models like the Norwegian or Canadian approaches.
4. Current Status of the Negotiations: This section examines the negotiation progress, the withdrawal agreement, and the political challenges faced by the British government.
5. Political Implications: This chapter discusses risks such as potential further withdrawals and the political consequences for specific British regions.
6. Economic Consequences: This section details impacts on the monetary system, the financial sector, and the labour market, specifically highlighting migration issues.
7. Trade: This chapter analyzes trade in goods and services, trade restrictions like tariffs, and non-tariff barriers (NTBs).
8. Welfare Effects: This chapter reviews existing literature and presents the author’s structural gravity model to predict trade flow changes.
9. Conclusions: The final chapter summarizes the findings, noting that while Brexit has various aspects, the disadvantages likely outweigh the advantages.
Key Words
Brexit, European Union, United Kingdom, Referendum, Hard Brexit, Soft Brexit, Economic Consequences, Trade Relations, Gravity Model, Welfare Effects, Financial Sector, Migration, Labour Market, Tariffs, Non-Tariff Barriers
Frequently Asked Questions
What is the core subject of this thesis?
The thesis explores the potential economic and political consequences of the United Kingdom's departure from the European Union, commonly known as Brexit.
What are the primary thematic areas covered?
The main themes include the classification of Brexit scenarios (hard vs. soft), political implications for the UK and EU, economic impacts on trade and finance, and the effects on the labour market.
What is the research goal?
The primary goal is to assess whether a hard Brexit is economically viable compared to maintaining closer relations and to analyze the resultant welfare effects for the UK and the EU.
Which scientific methodology is utilized?
The author employs a structural gravity model to empirically analyze trade flow changes and potential welfare losses resulting from the Brexit scenarios.
What does the main body address?
The main body covers the history of the referendum, status of negotiations, sectoral economic impacts (finance, trade, labour), and welfare estimates based on various quantitative models.
Which keywords characterize this work?
Key terms include Brexit, European Union, economic consequences, trade relations, structural gravity model, and welfare effects.
How does the author evaluate the "Norway alternative"?
The author notes that while the Norway alternative provides access to the Single Market, it requires the UK to accept EU laws and financial contributions without having voting rights, making it a controversial option.
What is the role of the Irish border in the negotiation process?
The Irish border represents a significant political challenge, as the EU insists on maintaining peace and preventing a hard border, which complicates the renegotiation of the Withdrawal Agreement.
- Arbeit zitieren
- Fabian Laux (Autor:in), 2019, Brexit and the potential consequences for the United Kingdom and for the European Union, München, GRIN Verlag, https://www.grin.com/document/463876
