Brexit. Which potential influences does it have for the British Economy?


Seminar Paper, 2018
18 Pages, Grade: 1,7

Excerpt

Table of contents

Table of figures

1. Introduction
1.1. Problem Statement
1.2. Objective
1.3. Structure of the term paper

2. Economics of the United Kingdom
2.1. Economic Situation of the United Kingdom
2.2. Economic relationship of the United Kingdom with the European Union

3. Impacts of the Brexit on the British economics
3.1. Impacts on the tertiary sector
3.2. Impacts on the good trade
3.3. Foreign direct investments in the United Kingdom

4. Chances after the Brexit
4.1 The Switzerland Model
4.2 The Norwegian Model

5. Summary

Appendices

List of Cited Literature

Table of figures

Figure 1: GDP in 2016 of the EU 28 and other OCED States

Figure 2: GVA Shares in %

Figure 3: Exports of goods to the EU from the largest EU countries (2011-2015)

Figure 4: Foreign direct investment received in 2015 by the UK, Switzerland and eight other EU countries

1. Introduction

1.1. Problem Statement

On 26 June 2016 For the first time in the history of European politics, direct democracy was applied. The British population decided directly and not through a parliamentary representation in a referendum, to withdraw from the European Union. The British EU scepticism rose with the debt crisis in the euro zone that had existed in the years prior to the referendum. At the end of the referendum, a majority of 51.9% of the British popu- lation was against remaining in the EU. The referendum had a turnout of 72%, with Scotland and Northern Ireland showing a majority rejection of the resignation, while Wales and England spoke in favour. Never before in the history of the EU, a country has left the Confederation of States which makes the economic consequences of the so-cal- led Brexit for the British or European economy uncertain, because it is unclear what the relations of the United Kingdom and the European Union will be like after the withdra- wal. The British government had until March 2017 after the referendum to announce an official exit notice, and Theresa May submitted her country's official resignation to the EU on 29 March. Future economic and political rules between the EU and Britain will be negotiated under Article 50 of the Lisbon Treaty. It is important that if the EU and Britain cannot agree on the different points within two years, the EU treaties will beco- me invalid for the United Kingdom. Article 50 has never been applied because no EU member state has ever wanted to leave the alliance. For this reason, the outcome of the negotiations is currently uncertain.

1.2. Objective

It seems that if the Brexit will come, there can occur a lot of Problems for the british population and economy, but also on the economy and population of other EU member States, because of different regulation consequences which will come with the Brexit. The question is, how far the Brexit can influence the british economy positively or ne- gatively. Another question is what models the british population can use after the poten- tial Brexit to prevent a negative outcome.

The aim of this work will therefore be to identify the potential impact of the Brexit on the UK economy, as well as on the EU.

1.3. Structure of the term paper

This paper first deals with the British economy and how to assess the general British economic situation.

Afterwards the general relationship of the United Kingdom with the European Union is described.

Chapter three then examines the possible impact of Brexit on the UK economy. This means that at first the influences on the tertiary sector, which plays a very important role in the UK, are analysed. Then the trade in goods and the influence of Brexit on it will be assessed. As the last part of this chapter, the foreign direct investment in the United Kingdom and thus the effects of a potential exit from the EU will be analysed. Before the conclusion is drawn, the chances that a potential Brexit could bring with it, will be assessed using two different models that Great Britain could use for its own advantage. On the one hand the Swiss model, which deals with the situation of Switzerland with the EU, is analysed and on the other hand the Norwegian model, which deals with the European Economic Area and is related to it, is described and the advantages which Great Britain could have with these models are analysed.

2. Economics of the United Kingdom

2.1. Economic Situation of the United Kingdom

OCED Data of 2014 says, that with 63.7 Mio. Inhabitants, the UK has the third highest density of population in the EU, only Germany and France have higher density in popu- lation. 32.6 % of those 63.7 inhabitants are in emplyable age. The rate of unemployment with 4.9 % is smaller then the one of the average EU country. 1

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: GDP in 2016 of the EU 28 and other OCED States (Own representation based on OCED 2016d)

Figure 1 illustrates the GDP in 2016 of some large OECD countries. To make it easier to compare the countries' economic power, the GDP of the countries shown was converted into US dollars on the basis of Purchasing Power Parity (PPP). Germany is the largest economy with 4.046,18 billion dollars, but the UK is the second largest economy in the EU with 2.812,89 billion dollars.2

2.2. Economic relationship of the United Kingdom with the European Union

Since the UK joined the EU 1973 it maintains close economic and financial relations with the association of states. Economic relations are based on the four freedoms of the internal market, i.e. the free movement of goods, services, capital and persons. The UK contributes almost 18 per cent to the total economic output of the EU.

For the UK the most important partner for trade is the EU. The UK exported 44,4 % of all of its trades to the member states in 2015 and imported 53,6 % of its imports from the EU. Compared to 1999, the im- and exports declined, this can be stated by the num- ber of exports of 60.8 % to the other EU Members in this year.3

The changes on the side of imports are not as severe as the ones on the export side. The British imports from the EU rose by 5 % to 53 % from the low point in 2012 to 2014.

Related to the GDP, the exports show a slightly downward trend, whereas the trend for imports is slightly positive.4

It is seen that in 2006, there was the proportionally highest value for exports of goods to the EU States with 62.7 %, but afterwards the importance of the EU for exports decline for the UK. The reason for this situation is the weaker economic growth of the EU states and because the increase of trade relation with growing economies such as China e.g..5 The importance of the EU for the british economy is also stated by a study of The City UK from 2014, where it is stated that about 60 % of the foreign trade goes to the EU or to countries, with wich the EU has trade agreements. 6

3. Impacts of the Brexit on the British economics

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: GVA Shares in % (Own representation based on Barbara Böttcher, 2017, p. 4)

The british economy is a service society, which can be seen at the pie chart above. The tertiary sector holds 77 % of the GVA Shares of the UK, whereas the manufacturing in- dustry holds 11%, the constructing sector holds shares in the amount of 6 %, while other manufacturing sectors and the agriculture hold the smallest shares with 5 % and 1 %. 7

The EU and the UK are important trade partners and economically seen, important for each other. So far, the british market has been a large single market of the EU’s internal market.8 If the UK is going to fulfill the Brexit it wont be a part of the EU’s internal market anymore and a estimated loss of the british GDP of 1-3 % is projected. 9

[...]


1 See, OCED (2016), pp. 275

2 See, OCED (2016), p. 41

3 See, Busch, B. (2016), p. 1

4 See, Busch, B (2015), p. 45

5 See, Busch, B. (2014), p. 12

6 See, Busch, B (2015), p. 45

7 See, Böttcher, B. (2014), p. 4

8 See, Penatzer (2015), p. 3

9 See, Böttcher, B. (2014), p. 4

Excerpt out of 18 pages

Details

Title
Brexit. Which potential influences does it have for the British Economy?
College
University of Applied Sciences Essen
Grade
1,7
Author
Year
2018
Pages
18
Catalog Number
V471122
ISBN (eBook)
9783668953222
Language
English
Tags
Brexit
Quote paper
Ramos Vanessa (Author), 2018, Brexit. Which potential influences does it have for the British Economy?, Munich, GRIN Verlag, https://www.grin.com/document/471122

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