Name: Hassan Shoaib

Running head: ANALYSIS OF BREXIT 1

Analysis of Brexit from an economical perspective

Following the wake of prior economic crises, Contemporary economics generally

opposes the inclination for further trade barriers. However, the issue of the future of UKs EU

membership is a far more complex situation as there is validity to be held in both sides of the

argument and while the conservatives are in favor of the Leave movements ideology of

proposing an amicable divorce, while retaining strong trading links with EU nations (BBC,

2013, para.1), the democrats have opposed this by dismissing the proposal as too idealistic and

nothing more than a pipe dream. This situation has forced UKs current Prime minister David

Cameron to take action and call for a referendum on Britains membership of the EU to take

place on the 23rd June (Mason, Watt, Traynor & Rankin, 2016). while quite some time has

passed since the decision for a referendum was made, according to recent polls public opinion

regarding this issue remains split even with a good portion of the citizens still hesitant on making

their decisions (YouGov, 2015) and although though the alternative of leaving the EU has merits,

I, however think Britain should not withdraw from the EU as the tradeoffs dont justify the loss

of trade, security and multinational benefits.

Primarily, Leaving the EU would erect trade barries across europe resulting in a loss of

trade and increased tariffs across Europe. The EU membership comprises of a single market

system providing a regulatory framework that fosters the free movement of goods and the free

movement of services (EU, 2016) to its members with minimal trade costs and barriers. Critics

of this argument often point out the fact that UK could alternatively negotiate separate free trade

agreements with the European nations as Springford & Tilford state The UK would probably

have little difficulty in negotiating an FTA. There is a good chance that the tariffs levied by the
ANALYSIS OF BREXIT 2

EU on British manufactured goods would be zero (2014, p.11). However, Experts dismiss these

claims as impractical and subsequently causing a net loss in trade in the long run since EU is

UKs major trading partner worth more than 400bn a year, or 52% of the total trade in goods

and services (BBC, 2016, para.23). Thus, Withdrawal would result in paying large amounts of

tariffs across the EU with car exports to the EU, for example, facing a 15% tariff and imports a

tariff of 10% (BBC, 2016, para.23). To sum up, leaving the EU would cause complications in

the trade infrastructure weakening the trade market as a whole.

Secondly, the implications of a UK departure would also be noteworthy in terms of the

security staying in the EU would provide. The EU link offers stability to the country, making it a

trusted nation and inducing value to the economy. Therefore, withdrawal from the EU could

cause substantial economic distress, predominantly the decline of UKs Gross domestic product

as according to The Centre for Economic Performance, at the London School of Economics, the

worst-case scenario is a 6.3% to 9.5% reduction in GDP, a loss of a similar size to that resulting

from the global financial crisis of 2008/09 (CEP, 2014, p.1). This loss could cause pose serious

issues regarding the stability of the country and moreover lead to questions regarding the validity

of Sterling as a dependable currency with Peter O'Flanagan, head of foreign exchange at

specialist risk firm Clear Treasury, already bracing for a sterling shock if Britain votes to leave

the EU (Hunter, 2016, para.9). Nevertheless, Conservatives usually claim that this loss is

inflated and would be offset by an estimated 14 billion saved in Membership fees (McKinney,

2016). The membership cost might seem a great deal to the general public but it is negligible

compared to the benefits it brings to the economy as McKinney (2016) from the Institute of

Economic Affairs states that continued membership of the EU could cost the economy 13% of

its value every year. Only a small portion of that is put down to the membership fee (para.2) and
ANALYSIS OF BREXIT 3

so the sheer amount of benefits to the economy the membership provides dwarfs the minor

membership fees.

Lastly, The EU membership boosts multinational reach for UK citizens as far as job

opportunity goes by providing the citizens a borderless infrastructure and thus giving them the

Ability to work in other member states without having to apply for work permits or visas. Hence,

Withdrawal from the EU would create numerous difficulties in the job market as one report

states 3,445,000 jobs in the UK depend upon exports to the EU (Ardy, Begg, & Hodson, n.d.,

para. 1). Furthermore, such multinational barriers could cause manufacturers to undermine UKs

worth as a manufacturing hub resulting in millions of jobs being lost as global manufacturers

moved to lesser-cost EU countries (BBC, 2016). Advocates of the Leave moment generally

emphasize the flexible nature of the job market as well as claim its dynamic aspect is sufficient

enough to adapt quickly to changed relationships with the EU. However, Experts disagree and

have their findings results aligned with the stay campaign and according to Hawes "The

attractiveness of the UK as a place to invest and do automotive business is clearly underpinned

by the UK's influential membership of the EU" (2014, p.3). Hence, Leaving the EU would cause

numerous problems in the job market and could lead to severe unemployment issues for the

nation.

Quantifying all the adverse effects of Brexit is problematic. Leaving the EU could

influence UK in numerous ways, immigration policies, sovereignty laws, gun control laws could

all be affected vastly. Furthermore, there is great uncertainty over the future of UKs relationship

with the EU nations as it will all depend on the policies built as a result of the referendum. For

this reason, analysis may vastly differ from each other and so accordingly, this situation is best

understood by looking at the trade and economic changes the decisions will bring. Therefore,
ANALYSIS OF BREXIT 4

reduced integration with the EU nations is certainly going to impact the economy in a negative

way by erecting further trade barriers between nations and cause considerable damage to the

country in the long haul. In conclusion Leaving the EU would not be so beneficial for the UK as

the drawbacks dont rationalize the numerous benefits staying in the EU would provide.
ANALYSIS OF BREXIT 5

References

Ardy, B., Begg, I., & Hodson, D. (n.d.). UK JOBS DEPENDENT ON THE EU. Retrieved from
http://www.europarl.org.uk/resource/static/files/ukjobs.pdf
Brexit or Fixit? The Trade and Welfare Effects of Leaving the European Union. (2014).
Retrieved from http://cep.lse.ac.uk/pubs/download/pa016.pdf
EU Referendum Trackers. (2016). Retrieved from
http://d25d2506sfb94s.cloudfront.net/cumulus_uploads/document/9at33959a0/YG-
Archives-Pol-Trackers-Europe-Referendum-150416.pdf
Hawes, M. (2014). The UK Automotive Industry and the EU. SMMT. Retrieved from
http://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-KPMG-EU-Report.pdf
Hunter, T. (2016, April 14). How Brexit will affect your money: Investments, currency and more.
Telegraph. Retrieved from http://www.telegraph.co.uk/money/special-reports/how-brexit-
will-affect-your-money/
UK and the EU: Better off out or in? (2013, May 14). BBC. Retrieved from
http://www.bbc.com/news/uk-politics-20448450
Mason, R., Watt, N., Traynor, I., & Rankin, J. (2016, February 20). EU referendum to take place
on 23 June, David Cameron confirms. Retrieved from
http://www.theguardian.com/politics/2016/feb/20/cameron-set-to-name-eu-referendum-
date-after-cabinet-meeting
McKinney, C. J. (2016, April 28). Ask Full Fact: Our EU membership fee and the economy.
Fullfact. Retrieved from https://fullfact.org/europe/ask-full-fact-our-eu-membership-fee-
and-economy/
The European Single Market. (2016). Retrieved from http://ec.europa.eu/growth/single-
market/index_en.htm
Tilford, S., & Springford, J. (2014). The Great British trade-off The impact of leaving the EU on
the UKs trade and investment. Retrieved from
http://www.cer.org.uk/sites/default/files/publications/attachments/pdf/2014/pb_britishtrad
e_16jan14-8285.pdf