Cia Iii Macroeconomics Brexit: Impact On The Economy of United Nation. Name: Ankita Dutta REG - NO:1837020

CIA III
MACROECONOMICS
BREXIT: IMPACT ON THE ECONOMY OF UNITED NATION.
NAME: ANKITA DUTTA
REG.NO :1837020
Brexit is the impending withdrawal of the United Kingdom (UK) from the European union (EU). it follow the
referendum of 23 June 2016 when 51.9 percent of voters chose to leave the EU. Withdrawal has been
advocated by Eurosceptics both left wing and right wing] while pro-Eurosceptics, who also span the political
spectrum, have advocated continued membership.
Brexit vote imposed these three hard choices on the U.K.
● The U.K. doesn't have the economic clout to negotiate a better one. Many in Parliament disagreed with
that assessment.
● Leave with no deal, known as "no deal Brexit." But without a trade agreement, ports would be blocked
and airlines grounded. In no time, imported food and drugs would run short. Since the deadline is
drawing near, many companies are preparing for this outcome. The opposition Labour party leader said
he won't meet with May unless she takes the "no deal Brexit" off the table
● Vote again on Brexit. Some of May's opponents want to remain in the EU. Polls show the UK would
reject Brexit if the referendum were held today. They argue that voters did not understand the economic
hardships that Brexit would impose. On December 10, the European Court of Justice ruled that the U.K.
could revoke its Brexit application unilaterally. No other EU body is needed to approve the withdrawal.
The macroeconomic effects of Brexit: longer term

● There have been many prediction regarded to the macroeconomic consequences of Brexit, it has been
mentioned that there will be a long-term loss of GDP for the UK economy as compared with the status
projections that would had remained fully in the EU.
● The lower GDP prediction than would not mean an actual fall in prosperity, but would definitely lead to
lower growth than expected over a long period approximately 30 years. Though the range of estimate of
the year is large but the prediction is about loss of GDP of nearly ten percentage points.
● The main reason for the impact in the economy for a long run lies in the assumptions made from
denied the current access that the UK has to the EU single market to a new regime in which the UK
faces restrictions.
The macroeconomic effects of Brexit: short-term
● There is a consensus, even including proponents of ‘leave’, that there would be a short-term negative
shock to the EU economy from Brexit. o However, there is clear disagreement about the likely duration
of this effect and whether it would have only immediate limited costs or have permanent consequences.
● The two main reasons for this short-term effect,are
❖ Treasury , are that the uncertainty surrounding the outcome related to the investment and the
transitional costs of shifting to a new regime for trade and investment.
❖ Currency volatility and financial market reactions. The Bank of England was already warned that
Brexit could result in financial instability leading to the damaging of macroeconomic variables
because of the financial openness of the UK.
IMPACT ON VARIOUS SECTOR.

1. Employment: week, not the £350 million as expected so it was claimed, because what the UK ‘sends to Brussels’ is
an amount from which the UK rebate has already been deducted.
3. Economic Effects of Migration: Migration from EU has both positive as well as negative impact. There has been debate that
the inflow of labour from the EU has had a beneficial effect on both the supply of labour and public services, in particular that
rely on EU workers. EU citizens of working age are mostly employed than their indigenous counterpart. As loss of GDP
meant a lower level of employment in the UK economy. Employment came from the demand of UK Demand
goods and services and this translates into around 3.3 million jobs from other EU countries constitutes around
12%.
● Jobs were definitely at risk. The composition of job in UK changed in some there was a decline
in the job status while in some there was increase depending upon the current shift.Some job
losses are likely in the City of London, as many of its representatives have made clear, while
major exporters (such as the manufacturers of cars) could be forced to retrench if obstacles to
exporting to the EU increase.
● There were some import competing industries which become more competitive ,can be expected
to job increases if exit from the EU or because a new trade regime raises the costs of imports or
because they can then avoid regulations that impair their competitiveness.
● The UK economy has become reliant on the service sector, both as the main engine of job
creation and as a source of export demand after brexit
● The outlook for UK access to export markets in services would have vital role for future job
creation: the digital and creative industries have been identified in various studies as especially
important.
2. Public Finance: The direct effect of Brexit on the public finances was that UK was able to save on its current
payments into the EU budget. It would have impact on the economy if savings from direct contributions to the
EU budget would be erased if Brexit results in a GDP loss of as little as one percentage point and the public
finances would be worse if the loss were greater, despite no longer paying into the EU.According to the 2014
data it was found that, the saving was around £280 million per s and make a positive contribution to the UK’s
public finances.Migrants from some origins do remit some of their income to their home countries and leads to
loss for the UK economy. But in some areas migration cause pressure on public saving and housing.
Some of the Consequences are:
● Inflation unexpectedly hits six-month high
The rising price of different items caused a surprise jump in inflation in months. The consumer price index
increased to 2.7% in August from 2.5% a month earlier, confounding economists’ forecasts for a decline to
2.4%. Although some observers suggest the increase may be temporary, others worry that wages are only just
rising faster than inflation to the detriment of living standards.
● Services offset manufacturing.

There were positive growth for the economy from in the business activity, pointing towards stronger growth in
the services sector despite of a downward trend in manufacturing output. The purchasing managers’ index
projected an increase for the service sector, which accounts for about 80% of the UK economy, from 53.5 to
54.3. Despite having better growth in service sector, manufacturing output dropped to 52.8 from 53.8 a month
earlier.
Trade Deficit Unexpectedly narrowed.
The UK’s trade deficit – by how much imports exceed exports – narrowed slightly in July to one of the best
monthly readings in 20 years, driven by stronger exports around the world. The trade in goods deficit shrank to
£10bn from £10.7bn in June, confounding economists’ forecasts for a deficit of about £11.8bn. The overall UK
trade deficit for goods and services fell by £1.4bn in the three months to July to reach £3.4bn. Over the past 12
months, however, exports and imports of goods to and from EU countries increased by more than those to and
from non-EU countries.
CONCLUSION
There may well be opportunities for the UK to cut costly regulations, although some of the amounts claimed
exaggerate the likely benefits. However, it is too easily forgotten that regulation also has benefits and, that,
contrary to the general image, an absence of regulation can also be costly, whether for consumers or, in some
instances, businesses. o In some instances the UK has chosen to ‘gold-plate’ regulations making them more
onerous than required by EU rules. IMF and OECD also highlighted the likely adverse consequences for EU
partner countries and the prospect that Brexit could be a negative shock for the global economy, derailing its
fragile recovery from the crises of recent years.
REFERENCE
1. https://www.vox.com/2018/11/28/18116763/brexit-economy-bad-deal-no-deal
2. https://www.lse.ac.uk/europeanInstitute/LSE-Commission/Hearing-11---The-impact-of-Brexit-on-jobs-
and-economic-growth-sumary.pdf
3. https://www.theguardian.com/business/2018/sep/27/how-has-the-brexit-vote-affected-the-uk-economy-
september-verdict

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CIA III

The macroeconomic effects of Brexit: longer term

IMPACT ON VARIOUS SECTOR.

● Services offset manufacturing.

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