Introduction
On June 23rd 2016, the United Kingdom voted, in a referendum, to leave the European Union.
The end of World War II was marked by an era of globalization.
Global trade had grown faster than global output. Between 1980 and
2007, global trade tripled while economic output only doubled.
Most experts believe that Brexit will hurt British trade, because the UK’s
economy is deeply integrated with the rest of the EU.
The financial and professional services industry — banks, accountants and
corporate lawyers — would also be greatly impacted by Brexit. London is the
largest financial centre in Europe.
Unlike the UK, the trade impact from Brexit on the EU economy is likely to
be negative but small. The UK is a large trading partner for the EU, with
total trade amounting to about 5% of the EU’s GDP (Gross domestic
product).
Brexit will damage different branch of the industry like: Banking,
Technology, Car Industry, Food and Drinks and Pharmaceuticals.
Banking
According to professional services firm EY, the UK is expected to have lost
10,500 finance jobs since day one of Brexit.
EY reported that almost a third of City firms had already confirmed moves to the
continent, however it also noted that the number of jobs estimated to be
moving has dropped by 2,000 from a year ago.
The EU dealt a major blow to the UK in November after it agreed to move the
European Banking Authority to Paris, after a dozen EU member states lobbied
to host the regulator.
Technology
Brexit has raised questions over London’s status as a European tech capital
and has cast doubts over the UK’s attractiveness to investors. For financial
technology firms, the biggest Brexit-related threat might be the possibility
that UK-based companies will be unable to serve continental European
clients after March 2019.
Recruiting could also prove more problematic. Several pieces of research
have already shown that EU workers are less willing to come to the UK now
than they were before the Brexit vote.
Car Industry
The Society of Motor Manufacturers and Traders estimated last
month that a no-deal Brexit would cost the motor industry an additional
£4.5bn in tariffs.
Toyota said in September that it may be forced to shift some UK production
work elsewhere, while Aston Martin’s chief executive called for Theresa May
to provide clarity by the first quarter of 2018.
Food and Drinks
In 2017, several companies continued to quietly shrink the size of their
products in a process that has become known as "shrinkflation" – where
prices remain the same as portion sizes get smaller.
In October, accountancy firm Moore Stephens said that the rising cost of
imports has put 20 per cent of UK restaurants at risk of going bust.
Pharmaceuticals
Members of Parliament (MPs) of the House of Commons raised concerns in
December about regulation of the pharmaceuticals sector post-Brexit, warning
that the UK’s departure from the EU could make Britain a less desirable
place for investment and development.
Findings by the Business, Energy and Industrial Strategy Committee,
based on research from the British Medical Association and other
organisations, found that Brexit could threaten research into new drugs.
Alternative Trade Agreements Introduction
Of course, the UK can avoid negotiating trade agreements country-by-country
by simply joining a trade union.
There are several options for managing its trade relationships:
European Economic Area
If the UK remains the European Economic Area under a soft Brexit, then
British firms would have unimpeded access to the Single Market.
The UK’s trade relations with the EU would become similar to those between
the EU and Norway.
There would be no tariffs on trade in this scenario, but the UK
would have no power over EU trade policy and would need to follow EU
regulation without having a say on the regulations.
EU Customs Union
An alternative to the European Economic Area would be the EU Customs
Union.
The EU Customs Union eliminates internal tariffs, but unlike the European
Economic Area, it requires member states to agree beforehand to common
tariffs with countries outside the EU.
Typically joining the EU Customs Union is a precursor to full EU membership,
so this trade relationship would be unlikely for the UK.
Swiss-style
Swiss-style trade agreements would be modeled after those between
Switzerland and the EU.
Switzerland has a series of bilateral trade agreements on a sector-by-sector
basis with the EU.
Only about 20 of those are important, but not all-important sectors are
covered. For instance, Switzerland has free trade for goods but no
comprehensive agreement for free trade of services. Moreover, Switzerland
has no agreement on the trade of financial services with the EU, which is a
huge industry for the UK that would be affected by Brexit.
Another issue is the constant renegotiation of trade agreements as EU
legislations are newly created or revised.
Free Trade Agreement
The UK could also negotiate a Free Trade Agreement with the EU to make
tariffs on most goods zero.
Unlike the EU Customs Union, the UK could determine its own trade policies
with other non-EU countries.
But the deeper the trade agreement is, the more EU regulations and standards
the UK would have to abide by. The UK would still be subject to anti-dumping
and rules-of-origin measures that would make it more difficult for British
companies to fully integrate with EU supply chains.
World Trade Organization’s rules
Lastly, the default scenario is to simply revert to the rules of the World
Trade Organization (WTO). This is also the outcome of a hard Brexit.
The UK would not have to comply with EU regulations but instead would be
subject to the EU's Common External Tariff and other substantial nontariff
barriers to trade.
For instance, EU's tariffs range from 5% for car components to 10% for cars to
15% for food imports.