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Will Britain Regret Brexit?
In June of 2016, the UK made a monumental decision to leave the European Union (EU). The UK Independence Party led the movement because they believed that the EU was holding back Britain. Some of their reasons included, too many restrictions on business, high membership fees for little in return and the idea of free movement within EU member states. The subsequent exit from the EU will take some time however because decisions about treaties and agreements will have to be negotiated. The initial shock has had some negative impacts on the economy. Although Britain hasn’t technically left the EU, the vote to leave the EU has decreased the value of the pound, affected trade among neighboring EU members and will impact immigration and the labor force in Britain.
Following the referendum, the value of the pound drastically decreased relative to the value of the euro and the US dollar. By mid October, the pound had hit a 31-year low because of Brexit scares. With the pound’s decrease, this affects Britain’s economy by increasing import costs. So the cost of products such as food, clothing and other imported goods are likely to rise. Also by losing value it may have an affect on consumer spending, especially during the holiday months when consumer spending is generally very high. In an article written by Angela Monaghan from the guardian she explained, “Against the dollar, the pound is lingering around the $1.22 mark- about 18% lower than on 23 June, the day of the referendum”. The decrease in value of the pound and increase in inflation will most notably squeeze the economy.
One aspect of the European Union that is alluring to countries is the idea of a single market. As explained in “Brexit and the EU Single Market” from Lawyers for Britain, “The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties”. This idea of a single market is one of the main factors the EU exists because all the countries in the EU are working together to benefit each other’s economies. However, Brexit will affect trade for Britain with their geographical neighbors. In the House of Commons Library Briefing paper, they reported, “Taken as a group, the EU is by far the UK’s most important trading partner. In 2015 it accounted for 44% of UK goods and services exports (£222 billion) and 53% of UK imports (£291 billion)” (23). As you can see, a trade agreement with the EU is very important for Britain to sustain economic success.
Another topic that weighs heavily on how negotiations go between the EU and Britain is the idea of free movement of people. Certain changes to immigration rules would impact the economy because it would force people from other EU nations that are currently working in Britain to find work elsewhere. This would have a negative impact on Britain and other EU nations. As suggested in the House of Commons Library Briefing Paper, a more restrictive policy would be to extend immigration rules for non- EU nationals to all non-UK nationals (35). Although, it is estimated that only 12% of employees working in the UK would qualify for those new immigration rules (35). A restrictive system would put added pressure on businesses to comply with new rules and use more resources to gain access to visas for their employees. Sectors that would feel the most impact by this issue would be those that employ a high number of non-UK nationals, which are accommodation and food services (13%) and manufacturing (10%) (37). However, these restrictions depend on how negotiations go between Britain and the EU.
The initial shock from Brexit has affected the value of the pound, impacted trade relations for Britain and will cause for new immigration laws. With that being said, we are still around two years away from Britain officially leaving the EU. Once Article 50 is filed, which is expected to be done by March 2017, it will give the two sides two years to negotiate the terms of the agreement. This will surely be a topic to watch, especially how Britain reacts to the immediate burdens from neighboring EU countries.
"Brexit and the EU Single Market." Lawyers for Britain. Lawyers for Britain Limited, n.d. Web. 5 Nov. 2016.
Miller, Vaughne, ed. "Brexit: Impact across Policy Areas." House of Commons Library Briefing Paper 07213 (2016): n. pag. Web. 9 Nov. 2016.
Monaghan, Angela. "The Brexit Economy: Falling Pound and Rising Inflation Fuel Fears of Slowdown." The Guardian. Guardian News and Media Limited, 24 Oct. 2016. Web. 7 Nov. 2016.