A Tale of the UK Quitting EU

Before Brexit, the United Kingdom had deep economic integration with the European Union. After Brexit, the UK left the single market, changing trade relationships. The trade barrier emerged between the UK and the EU; this affected the trade relationship of the UK with the remaining 27 EU member states. The departure of the United Kingdom from the European Union occurred on January 31st, 2020. The day was a long-awaited historic move that was proposed to significantly change the policies and politics of the remaining 27 EU states and the UK, mainly. Flipping through the pages of history, in June 2016, the United Kingdom decided to leave the European Union, known as Brexit. 52% voted for Brexit, and 48% voted to remain within the EU. The process involves renegotiating issues like immigration, sovereignty, residence permits, trade regulations, and political and monetary issues across Europe.

Major Consequences 

The pound depreciated, car manufacturing in the UK declined, and $1 trillion worth of assets relocated from the UK to other European countries through the financial services sector following the announcement of Brexit. The uncertainty of Brexit caused volatility and affected businesses operating within the UK. Despite the trade barriers between the UK and EU after Brexit, both reached a trade agreement known as the Trade and Cooperation Agreement, which reveals that the trade between the two entities is no longer frictionless. The UK’s exit from the EU’s single market and customs union propelled the reintroduction of customs procedures, border checks, and regulatory requirements. These major changes increased administrative burdens and costs for businesses engaged in UK-EU trade. 

Impact on the EU and the UK

The International Trade Council reveals that the UK and EU will have tariff-free and quota-free access to each other’s markets. This simply means that UK residents will be restricted from working, studying, or starting a business in the EU, or vice versa. Brexit will automatically, mechanically, and legally leave hundreds of international agreements concluded by the EU. Another side of the coin is that non-trade subjects will have major political troubles as the EU member states will significantly change their policies per the new deals and regulations. 

Global Impact 

Globalisation and growing trade relations have increased the correlation between countries. Disturbance in one country will significantly impact other countries, and Brexit will impact global growth to a great extent. Major exporting countries like China and India will be greatly affected, as the EU is among the world’s biggest export markets. The Office for Budget Responsibility (OBR) estimates that Brexit would lead to a 25% reduction in imports by Britain. For the EU, the UK was one of the significant financial and military contributors, but with Brexit, the EU’s finances will be majorly impacted. 

Impact on India 

India is regarded as the UK’s third-largest source of FDI; surprisingly, there are over 800 Indian companies in Britain. With Brexit, these companies’ businesses will surely be affected. There will be fluctuations in exchange rates, and their bottom lines will suffer greatly. India considers Britain a gateway to the EU, but since Britain has exited, India has lost its advantage. As Britain is out, India has to work on an agreement separately with Britain. The UK accounts for at least 17% of India’s IT exports, so with Brexit, the cost will be very high, which is problematic for India. The major sectors that will be affected by Brexit include auto, metals, oils, auto components, pharmaceuticals, aviation, etc. 

With Brexit, major countries like India, the UK, and EU states will face a huge challenge in executing international businesses and economies. One thing is clear: Brexit makes the revival of global growth and international business more difficult; India and other countries must focus more on domestic demand to minimise the impact. Companies that have business in Europe have to rework their strategies. Policymakers must understand the impact of Brexit, as it is crucial to renew the UK’s economic strategy and improve international trade relations with other countries worldwide.

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