Brexit stands for Britain’s decision to exit the European Union (EU). The process began on 23 June 2016 when 17.4 million UK citizens voted in favour of leaving the EU versus 16.1 million who voted to remain. Subsequently, Theresa May followed by Boris Johnson as prime ministers of Britain were responsible for carrying out negotiations with the EU on Brexit.
The UK withdrawal from the EU will have far-reaching, medium-term and long-term political, economic and social consequences for both. This will have severe economic consequences for the UK with or without an agreement, at least in the short term. However, the consequences of a tough, non-negotiable exit will be more serious for the country. These include a declining GDP, declining economic growth, declining tax revenues, falling pound value, rising commodity prices and declining employment rates. Leaving without an agreement would cost the UK economy 252 billion pounds. According to the Bank of England, one of the consequences of leaving without an agreement is that the economy will shrink by 8 to 9 percent in one year.
Proponents of leaving the EU have many reasons to support the decision. They believe that under EU law, UK citizens should be allowed to work and trade in the EU, regardless of whether they are qualified or not. The result of this system is that highly skilled or highly educated people from other countries such as Australia and the United States who are not in the EU cannot get work permits in the UK. But in the new system, instead of merely considering nationalities, attention is paid to merits and abilities and this can have a positive effect on the UK economy in the long run. But proponents of the UK remaining in the EU believe that leaving, in the long run, will lead to the destruction of the UK economy and greatly increase poverty and unemployment. The UK plans to introduce an Australian-style points-based immigration system in the UK by the end of this year. European nationals living and working in the UK must apply for a visa which must be approved under the EU Settlement Scheme in order to continue living in the UK. A points-based immigration system is a system in which applicants are given points based on various parameters. Candidates who exceed the required number of points or people who get the highest score can enter the country. In general, such an immigration system has its own annual quotas.
Australia has a points-based immigration system that grants applicants points based on economically relevant parameters such as education, work experience, language skills and more. Applicants must select a profession from a specific list of occupations. They must also meet the criteria for obtaining a visa. The UK also plans to implement a similar plan for immigration and work in this country.
The EU and UK are negotiating a new trade agreement which will be completely different from the free trade treaty and may well impose tariffs on their respective goods. The free trade agreement facilitated UK exports to European countries; it was also able to easily import its requirements from the European market. Probable tariffs will raise the cost of exports for the UK. This will hurt British producers because exported goods to Europe will be more expensive, although a weaker pound can eliminate some of these disadvantages. Tariffs will also increase the cost of imported goods into the UK. More than one-third of UK imports come from the EU. The EU is actually the greatest market for its own products and 70 percent of EU-27 exports are sent to other European countries.
There is so much trade between the EU and the UK that it is impossible to change it all at once. But if the two sides cannot reach an agreement, it would mean the beginning of a wave of inflation in UK shops on all goods. Also, the lack of a trade agreement can delay the shipment of goods from other countries because border inspections will be intensified.
When the UK was a member of the EU, it was automatically party to the EU’s trade dealings with more than 70 countries. After leaving the EU, the UK is trying to establish bilateral relations, but it is unlikely that it will be able to reach an agreement on trade relations with other countries any time soon. According to statistics, the UK imports about $48 billion a year in foodstuffs, most of it from the EU. Failure to reach a trade agreement between the UK and the EU could make it difficult for the British to meet their daily needs.
In addition, Brexit creates many problems for European nationals living and working in the UK who will no longer have work visas. UK’s citizens working in other European countries will also face a similar problem. Brexit has influenced the UK economic growth. Many specialists estimate that this will drop to 6.5-7% over the next 15 years. The British currency was devalued the day after the referendum.
From 1 January 2021, a new immigration system will be introduced in the UK and EU citizens who want to live here must obtain a visa prior to arrival. EU citizens applying for a skilled work visa also need to be approved by their employer in order to apply.
It is estimated that Brexit reduced per capita income by up to 8.1%. Brexit shrank the UK economy by 9%. It is forecast that the UK cannot offset this 2% anyway.
Scotland, however, voted against Brexit. They believe staying in the EU is better for Scotland and the UK. They may call for an independence referendum and then apply for EU membership separately.
The Prime Minister of the UK, Boris Johnson, wants to avoid a hard border between Northern Ireland and the Republic of Ireland which may lead to new wars by Irish nationalists. Such a border can create numerous problems for many students and workers who commute every day between the Republic of Ireland and Northern Ireland. Changing the situation argued and indices mentioned depends on the new UK agreement with the EU, but it does not seem that EU decision-makers are ready to give any points to the UK. To the contrary, it seems that they want to make the UK decision to leave the EU a failed experience.
All the evidence shows that the UK exit from the EU will pose many challenges to the UK economy which, if not properly managed, could lead to long-term economic devastation and unbridled inflation.
