Welcome

to the
Presentati
on
INTERNATIONAL FINANCIAL MANAGE

"BREXIT & ITS EFFECTON UK ITSELF, EU AND

IMPACT ON GLOBAL ECONOMY AND
POSSIBLE IMPLICATIONS ON BANGLADESH"

Mr. Shabbir Ahmad

Professor of Finance
Department of Finance, University of Dhaka

Presentation by: Group - 2

Major S M Nuruzaman (Retd)
-31014
Md. Masud Rana -31015
Mohiuddin -31006
INTRODUCTION
If we look at the world scenario from the top what we see
today? The atrocities of so called IS (Islamic Sates), Changes
happened in Arab World due to so called Arab Spring, Worst
possible on-going civil war in Syria, Libya, Iraq and Yemen,
NEVER heard terrorist attacks in countries of Europe and USA
itself and so on.

All these events really worry us even sitting in a 3rd world

country like Bangladesh. And most recent incidents taking
place due to the executive orders signed by newly elected US
president Mr. Donald Trump also make us think about the
future of the world, when I remember a part of speech by Ms.
Hilary Clinton during her election campaign where she said to
Mr. Trump, He wants to make friendship with Russia, he
actually doesnt know that, Mr. Putin is going to eat up his
lunch sitting in Moscow.

YES, really changes are happening and changes would

continue to happen in the world economies, balance of power
and politics in the days to come. But we have to remember,
what really happens, has always got a reason to occur.
 Contents

European Union
BREXIT
Short-term Visible Impacts on UK
Long-term Implications on UK
Effects on EU
Consequences of Brexit for the global
economy
Implications for Bangladesh Economy
Challenges
 What is the European Union
The European Union (EU) is a political and economic
union of 28 member states that are located primarily in
Europe since 1957. It has an area of 4.32 Million km2,
and an estimated population of over 510 millions. The
EU has developed an internal single market through a
standardized system of laws that apply in all member
states. EU policies aim to ensure the free movement of
people, goods, services, and capital within the internal
market, enact legislation in justice and home affairs,
and maintain common policies on trade, agriculture,
fisheries, and regional development. Covering 7.3% of
the world population, the EU in 2016 generated a
nominal gross domestic product (GDP) of 16.477 trillion
US dollars, constituting approximately 22.2% of global
nominal GDP and 16.9% when measured in terms of
purchasing power parity. 6
 What BREXIT Means

BREXIT de-abbreviates Britain Exits !!!

The term used to describe the United

Kingdoms
withdrawal of membership from the
European Union (EU) since it joined the
EU in 1973.
BREXIT
 REASONS FOR BREXIT FROM EU
Britain wanted reforms in European union.
Link between immigration and EU membership.
The UK tax payers money goes directly into European union.
The relative health of the UK economy.

The European union regulation cost UK businesses over 600

million euro every week.
Britains loss of full authority over its economic policies and
regulations .
 BREXIT

The EU referendum was announced in

February 2016
The EU referendum was held on 23 June 2016
Decision: Leave won by 52% to 48%.
The decision of the UK electorate to "Leave
the EU reflects both economic and non-
economic factors.
This study focuses on the economic factors
only.
 BREXIT

The process of BREXIT started by holding the debate

in UK parliament to start the invocation of Article 50
of the Lisbon Treaty.
114 MPs voted against the bill of calling Article 50
for a second reading.
398 MPs voted for the bill to call Article 50 directly.
PM Theresa May already published the WHITE
PAPER for Article 50, which is official under-written
process for the same.
It may take at least 2 years to finish the whole
process for the UK & EU to accomplish BREXIT.
 Short-term visible impacts on
UK
The most immediate impact of Brexit was the devaluation of
the
Great Britain Pound (GBP).
GBP fell by 8 percent against USD on 24 June 2016.
GBP fell by more than 10 % against the Euro since the
vote.
As a result, UK exports have gained competitiveness.
Share market:
The Financial Times Stock Exchange- FTSE 100 Index
experienced a downturn immediately after the vote, but
recovered lately
The Financial Times Stock Exchange- FTSE 250 Index fell as
well and is still below pre-Brexit vote level
Demand for government bonds in the UK and elsewhere has
risen since the referendum as a result yields have fallen
 Long Run Effectson UK
1. Immigration
Annual net migration from Europe has more than
doubled since 2012, reaching 183,000 in March
2015. Immigration from the European Union is
currently boosting the workforce by around 0.5% a
year. This has helped support the economys ability
to grow without pushing up wage growth and
inflation, keeping interest rates lower for longer.
2. Trade and the manufacturing industry
Official trade statistics show that the European Union is
the destination for about half of all British goods
exports. The trading links are bigger if we include
the countries that the United Kingdom trades freely
with because they have a free trade agreement with
the European Union. These agreements mean that
 Long Run Effectson UK
3. Financial services and the City
Financial services have more to lose immediately after
a European Union exit than most other sectors of the
economy. Even in the best case, in which
passporting rights were preserved, the United
Kingdom would still lose influence over the single
markets rules.
4. Regulation, innovation and productivity
Brexit is only likely to have a limited impact on Britains
productivity. It would also need to implement the
unions regulations to continue to export easily to
the single market.
5. Foreign investment
Access to the single market is not the only reason that
firms invest in Britain. It is likely Britain would
 Long Run Effectson UK
6. Public sector
The British government could save about 10bn
per year on its contributions to the European
Unions budget if the country left the bloc. We
expect that Brexit would benefit the public
finances, but not to a huge degree.
7. Consumption and the property market
It seems clear that the City is the part of the
British property market that has most to lose if
the United Kingdom opts to leave the European
Union. We anticipate that the impacts on the
property market overall and on aggregate
consumption in the economy will be limited.
 Effects on EU
1. Trade within Europe
EU trade matters more for the UK
than UK trade for the EU, but
some states with big bilateral
surpluses feel a macro chill from
Brexit
2. Foreign direct investment
Businesses find it costly to relocate
investmentfrom the UK and there
is a risk the UK attempts to
undercut the EU on standards to
attract FDI
3. Liberalisation and regulation
The balance in the European Council
shifts away from liberalisation and
it becomes harder to form a
 Effects on EU
4. Immigration
There could be a weakening of
competition policy, looser
collaboration in education and
research and impacts on public
procurement
5. Industrial policy
Some countriesare affected by the
impact on remittances or diverted
migration, with the extent of
political contagion a big unknown
6. Financial services
One or two financial centres may
benefit, but businesses and
households suffer from the loss of
liquidity and increased cost of
 Effects on EU
7. Trade policy
The EUis a less attractive trade partner
without the UK in the deal and loses a
member state that puts its political
weight behind negotiations
8. International influence
TheEU loses substantial soft and hard
power assets, but may be able to act
more coherently externally and in
international institutions
9. Budget
The EU loses a budget disciplinarian and
a major net contributor, with the gap
needing to be filled by higher
contributions or less spending
10. Uncertainty
Uncertaintyis bad for business in the EU,
 Consequences of Brexit for
the global economy
1) Global growth was already fragile, prior to
Brexit and last month the World Bank downgraded
its own
estimate for 2016 for global growth from the
consensus figure of 3.0% to a radically lower
2.4%.
2) Much depends on the EU and Eurozone outlook.
We have harboured doubts about Eurozone
sustainable
growth for years.
3) Presumably the oil price will suffer (marginally
in the central scenario and less well in the worst
case) from
downward pressure as global GDP growth falters.
 Cont

4) Interest rates will remain lower for longer.

5) In the rush to safety, yields on most bonds of
developed economies have collapsed to record
lows in
recent months and, given increased global risk,
will likely remain very low.
6) FX rates: the pound will be weaker than before
and the Euro ought to weaken versus the dollar.
Implications for Bangladesh
Economy

The implications for Bangladesh

Economy will be analysed with respect
to the following dimensions:

Trade
Foreign Direct Investment
Remittance
Foreign Aid
Migration
 Implications for Bangladesh
Economy
Trade Conti..
Why is the EU the best market for Bangladesh?
Duty-free market access for all products under
Generalised Preference System (GSP).
More recent benefit: Duty-free, Quota-free market
Access for all- products-except-arms to the EU
market under the Everything-but- Arms Initiative
(EU-EBA).
One-stage Rules of Origin
Bangladesh runs the risk of losing these benefits in the
UK market.
Export growth potential of Bangladesh may get
undermined to a large
extent due to subdued demand in the concerned markets.
Weaker currencies in the UK and the EU zones imply
reduced buying power and thus lower prospects of
exports.
Exporters earnings will lose value in currency
 Implications for Bangladesh
Economy
Conti..
Foreign Direct Investment
The uncertainty and volatility in UK market is
likely to have adverse impact on its investment
bound to Bangladesh economy.
Remittance
Devaluation of GBP will have immediate
impact on Bangladeshs
remittance.
Migrant workers and non-resident Bangladeshis
may postpone sending remittance to
Bangladesh until GBP revives.
Foreign Aid
The flow of grants from both the UK and the EU
is likely to be affected based on their respective
economic states.
Official Development Assistance (ODA)
Migration
 Conclusion
Nobody exactly knows what will be the impact of Brexit on
the world economy including Bangladesh. However, the
impact will be lesser than anticipated- if the UK continues to
allow duty-free market access even after its exit from EU,
then Bangladesh would not have difficulties in export. In
that case, UK would continue to grow because of a large
number of NRB there. The government may have to make
necessary adjustments in the proposed budget and keep the
export sector vibrant by maintaining the tax at source on
RMG export. Bangladesh needs to proceed carefully by
inclusively analyzing post-Brexit global economic changes
by forming a national committee involving representatives
of all walks of relevant trade bodies and regulators so as to
react effective ways. The government ought to start
lobbying and need to renegotiate with UK to retain the