What is Brexit?

Brexit refers to the United Kingdom's (UK) decision

to leave the European Union (EU), following a
referendum held on June 23, 2016. This decision
marked a significant shift in the political and
economic landscape of Europe.
Meaning
Brexit is a portmanteau of "Britain" and "exit." It
signifies the UK's withdrawal from the EU and
encompasses the complex process and negotiations
that followed. 1 page
Important/Related Terminologies
 Referendum: A direct vote in which an entire
electorate is invited to vote on a particular
proposal.
 EU: The European Union, a political and
economic union of 27 European countries.
 Single Market: An integrated market allowing
free movement of goods, services, capital, and
labour.
  Customs Union: An agreement between
countries to remove tariffs on goods traded
between them.
 Hard Brexit: A complete break from the EU
with no agreements on trade.
 Soft Brexit: A scenario where the UK remains
closely aligned with the EU, retaining some
benefits of membership. 1 page
WHAT IS THE EUROPEAN UNION? (EU)
The European union is a group of 27 countries that
operates as a cohesive economic and political block.
Nineteen of the countries use the euro as their
official currency. The EU grew out of a desire to
form a single European political entity to end the
centuries of warfare among European countries that
culminated with World War II and decimated much
of the continent.
The European Single Market was established by 12
countries in 1993 to ensure the so-called freedoms:
the movement of goods, services, people, and
money.
The EU believe that when countries work together
they are a more powerful force, This helps make
small countries more competitive in the world
market.
WHAT’S THE BIG DEAL?
 EU does NOT handle all the government
business for the members (Confederation)
 Each country still makes its own laws, has a
military, and elect its leaders.

WHY BREXIT?
Brexit, the United Kingdom's decision to leave the
European Union, stemmed from a combination of
political, economic, and social factors:
1.Sovereignty: Many voters believed that EU
membership compromised UK sovereignty, with
laws and regulations imposed from Brussels.
Leaving the EU was seen as a way to regain
control over national legislation.
2.Immigration Control: Concerns over
immigration were significant, with many feeling
that EU policies allowed for uncontrolled
migration. Any EU citizen can work in any
 member nation of EU. Approximately, 1 million
people migrated to Britain in large numbers.
3.Economic Independence: Proponents believed
that the UK could better negotiate its own trade
deals outside the EU, reducing financial
contributions to the EU budget and establishing
regulatory standards tailored to its economy.
4.Loss of Employment: As due to immigration of
low skilled people who will work for less salary,
Britain’s citizens lost their employment and also
resulted in reduction of salaries for British
people.
5.Political Factors: The rise of populism and
internal divisions within the Conservative Party
played a role, with UKIP (UK Independence
Party) highlighting anti-EU sentiments that
gained traction in the electorate.
6.Global Trade Opportunities: Advocates
argued that Brexit would allow the UK to pursue
trade agreements with non-EU countries,
enhancing its global economic position and
fostering new partnerships.
7.Security Concerns: Some linked EU
membership to limitations on the UK’s security
 policies, believing that leaving would enable
more effective management of national security.
8.Regulatory Burdens: Some viewed EU
regulations as overly restrictive, hindering
business growth. Leaving the EU was perceived
as an opportunity to simplify regulations and
foster a more business-friendly environment.
9.Economic Discontent: Regions facing
economic decline felt neglected by EU policies.
Brexit was seen as a chance to address local
needs and stimulate economic growth.
SYRIAN AND IRAN ECONOMIC CRISIS
One of the reasons for BREXIT is that the Britain
does not handle well the economic and humanitarian
crisis of Syria and Iran. The migrants from these
countries were creating a lot of havoc.
Increase of terrorist activities and attacks over all the
EU member nations has resulted in slowdown of
industrial growth. Being a member nation in EU,
Britain cannot take its own decision regarding any
important problems; it cannot change some laws etc.
without the majority in EU parliament. So this
limited its scope of functioning towards what is
 needed in Britain, by the British parliament. It
resulted in a slowdown in Britain’s economy.

IMPACT OF BREXIT ON INDIA

 UK always has been an access point for the
business for Indian companies, being able to do
business in UK also provide access to the
European companies. After Brexit this window
will get close.
 India exports to Britain at 17.66% of the total
exports, which includes textiles, clothing,
machinery, jewellery, etc. this export rate might
decrease after Brexit.
 Indian companies that have an exposure to UK
may get temporary hit because of Brexit
 Government of India(BJP) has allowed 100%
FDI in India, this step can help India to become
a major global finance market.
 Indian markets delivered consistent returns over
the years.
Indian Companies with UK Holdings:
 BREXIT will have a significant impact on UK
holdings. The European operations of the non-
EU companies after BREXIT will depend upon
the outcome of UK-EU negotiations.
 Before BREXIT, TATA group has offered its
assets for sale in Britain and also the share value
of TATA group reduced, There are over 800
Indian companies in EU & 1,10,000 people were
employing in EU.
 The talk of referendum has already created a fair
amount of uncertainty amongst the business
community. BREXIT not only created
uncertainty but it could also adversely impact
investments & immigrations.
For Example:
 TATA motors have its largest subsidiary in
UK i.e., Jaguar and Land-Rover. JLR
contributes to 90% of TATA motors operating
profit.
 As for JLR more than 1/4th of its sales come
from Europe. Thus because of BREXIT it has
to redefine its strategy, they might consider
 relocating to other EU countries to keep
enjoying tariff benefits because their profits
were hugely impacted due to BREXIT.
BREXIT’S IMPACT ON INDIAN ECONOMY
Indian rupee become weaker: The rupee became 50
paisa weaker at 66.60 per dollar by the end of the
fiscal year.
AS SAID BY PRIME MINISTER MODI

“We have always seen Britain as the

gateway to Europe”. Thus there will be an
impact on MNCs and also on Indian companies.

Advantages of Brexit
1.Increased Sovereignty: The UK can enact its
laws without EU oversight, a central argument
for many "Leave" voters.
2.Independent Trade Deals: The UK can
negotiate trade agreements with countries
 outside the EU, potentially enhancing economic
growth. For instance, the UK signed a trade
agreement with Australia in June 2021.
3.Reduced Immigration: The UK can establish
stricter immigration controls, addressing public
concerns about population pressures.
4.Regulatory Freedom: The UK can amend or
repeal EU regulations that are viewed as
burdensome, potentially benefiting local
businesses.
5.Economic Independence: The UK can set its
monetary policies, free from EU constraints.
6.Support for Local Industries: Opportunities to
promote and protect local industries against
foreign competition.
7.Control Over Fishing Rights: Regaining
control over territorial waters to prioritize local
fishing industries.
8. Budget Savings: The UK can redirect funds

previously allocated to the EU budget towards

domestic priorities.

Disadvantages of Brexit
1.Economic Uncertainty: Brexit has led to
volatility in markets, with the pound dropping
significantly against the dollar post-referendum.
2.Trade Barriers: New tariffs and customs
checks may hinder trade with the EU, affecting
supply chains. For instance, exports to the EU
fell by 40% in January 2021 due to new customs
regulations.
3.Loss of Single Market Access: UK businesses
face challenges in exporting to the EU without
tariff-free access.
4.Labor Shortages: Industries relying on EU
labor, such as agriculture and hospitality, have
reported significant labor shortages.
5.Complicated Border Issues: The Northern
Ireland Protocol has created a de facto customs
border in the Irish Sea, complicating trade
between Northern Ireland and the rest of the UK.
6.Reduced Foreign Investment: Uncertainty
around Brexit has led some investors to
reconsider their positions in the UK.
7.Impact on Financial Services: The City of
London risks losing its status as a leading
financial hub if firms relocate to the EU for
easier access to markets.
 8.Social Division: Brexit has deepened political
and social divisions within the UK, leading to
increased tensions in communities.

Impact
Short-Term Implications:
1.Economic Instability: The pound dropped
significantly, impacting imports and inflation
rates.
2.Job Losses: Sectors reliant on EU workers faced
immediate challenges in recruitment.
Long-Term Implications:
1.GDP Growth: Predictions suggest a potential
decline in GDP growth rates; the Bank of
England estimated a 4% reduction in GDP by
2030 due to Brexit.
2.Trade Relations: The UK's global trade
dynamics will shift, with potential for new
agreements but also barriers with the EU.
3.Foreign Investment: Long-term impacts on
foreign direct investment are uncertain; firms
may favor EU countries for stability.
 4.Consumer Prices: Increased tariffs may lead to
higher prices for consumers, impacting
disposable income.
5.Public Services: Funding reallocations may
affect public services, especially if tax revenues
decrease.
6.Stock Market Volatility: The UK stock market
has experienced fluctuations due to Brexit-
related uncertainties.
7.BOP (Balance of Payments): Trade deficits
could widen if imports become more expensive.
8.Foreign Exchange Rates: Increased volatility in
currency markets can complicate international
business operations.

Comparison and Contrast

Comparing Brexit to other separations, such as
Greenland's exit from the EU, can provide insights
into the potential outcomes of such decisions. While
Greenland’s exit was relatively smooth, it was
primarily motivated by specific economic concerns,
unlike the multifaceted implications of Brexit. 1pg
Critical Appraisal
The decision-making process behind Brexit has been
fraught with challenges. Critics argue that the Leave
campaign oversimplified complex issues, while
proponents believe it was a necessary step towards
national autonomy. As former Prime Minister David
Cameron noted, “The British people have spoken,
and we must respect their decision.”
Government Measures and Initiatives
Post-Brexit, the UK government has sought to
establish new trade relationships globally, such as:
 Trade Agreements: Deals with Australia and
Japan have been signed, aiming to open new
markets.
 Support for Industries: Initiatives to support
sectors affected by Brexit, including grants and
subsidies.
GOLD PRICES
The prices of the precious metal increased 3%
overnight in the local market, as Britain decided to
leave the European union. With the sterling
undergoing the biggest one-day drop of over 10%
against the dollar, international investors turned to
safe-haven assets, thus increasing the gold price
5.3% to over $1,326 per ounce in one day.
As a result, the local gold price surged from Rs1,500
to Rs50,200 per tola (11,6grams) in just 24 hours,
according to ASSJA.

CONCLUSION
Brexit represents a landmark moment in the UK’s
history, with profound implications for its economy
and international relations. As the UK navigates this
new landscape, the challenges and opportunities
ahead will significantly shape its future.