Impact of Brexit on the United Kingdom’s Economy


This paper will explore the expected impact of Brexit on the United Kingdom’s economy. Process to leave the European Union may be considered as a considerable step for the member state. Such decision may appear as social, cultural and political process but one that accounts for various economic implications. The potential decision by the United Kingdom to leave the European Union or “Brexit” has attracted much debate. The enormity associated with the economic costs and the benefits of Brexit will be well understood with assurance before the event. However, various estimates have issued different scales as well as courses of impacts (Barrett, et al 2015).

Economic Impacts


Yearly overall migration from Europe has been reported to have doubled since the year 2012 whereby it reached almost 183,000 in March 2015. Immigration from the European Union was said to have boosted the workforce by almost 0.5 percent annually. Such impact assisted in supporting the economic capacity of growing without disturbing the wage growth, inflation and maintaining lower interest rates. It does not matter if the United Kingdom will gain for the powers of restricting the immigration from Europe but this will depend upon the future relationship with the entire European Union (Möller & Oliver, 2014).

If Britain wished to retain full access of the single market, it had to ensure that it maintains the free movement of labor between the Union and the United Kingdom. However, this may be unlikely to happen since policies are likely to change and restrict the number of the low skilled employees to enter the country and budge towards attraction of highly skilled employees. Such steps would emerge as a headache for the lower wage industrial sectors that largely depend upon the immigrant workers such as agricultural sector. However, the step may turn to be beneficial for other sectors that experience shortage of the highly skilled workers. In general, the policy may in the long run shift to be designed to cover Britain’s migration requirements (Barrett, et al 2015).

Trade and Manufacturing

According to the trade published official statistics, the European Union is shown to be a destination of almost half of the British Goods exports. Generally, the trade link is large if there is inclusion of countries that trades with the United Kingdom freely since they have a free trade agreement with the EU. Such agreement dictates that, 63 percent of the Britain’s goods exports are connected with the EU membership. There are possibilities that the favoring trade agreement may be reached after the Brexit since there would be various advantages for all sides due to continuous trade arrangements (Dagnis Jensen & Snaith, 2016). However, there may be a worst case for Britain if it would face tariffs for “most favored nation” aspect. Exporters may be forced to face other additional costs such as process to comply with the European Union rule of origin if being external part of the single market. Conversely, such issues may turn out to be inconveniencing factors that core barriers of trade. Additionally, there are fears that the exporters would remain high and dry. According to Lisbon Treat, any country that decides to leave the European Union is given two years to negotiate for the withdrawal agreement (Dhingra, et al 2016).

There are chances of experiencing falling tariffs with decline in the manufacturing process and the entire Europe experiencing a diminishing effect within the global economy due to absence of trade agreement with the EU hence hurting the United Kingdom’s exports. In few decades ago, Brexit would have been a better deal for Britain since the European Union has smaller benefits. However, Brexit effect will have to vary depending with the sector (Barrett, et al 2015). Brexit may offer Britain essential opportunity whereby it would be allowed to be the broker of its own trade deals with other non-European Union countries. In general, Britain may be able to have a unilateral free trade agreement. Other non-European countries may find themselves negotiating with the Country more easily and quickly rather than when dealing with the European Union’s bureaucratic process (Irwin, 2015).

Britain’s production sector may face higher uncertainty levels when compared to the service sector. However, potentiality of the outcomes may be variable since the production sectors depend on whether the United Kingdom will agree or fail to agree to be a trading sector with the EU. Chances of tariffs on the goods exported to the EU offer great decline opportunity whereas there would be opportunity of opening more trade with other countries or increasing the sector’s level of competitiveness with great competition or cheap inputs offering positive potentiality (Boulanger & Philippidis, 2015).

According to the commentators, they have expectation that the effects of Brexit on trade aspect may be relatively low. As well, there are certainties that leaving the European Union may turn out as a process of leaving the peripheral sector better in the long run particularly if the country will apply the new freedom in negotiating for the trade agreements with good impact (Oliver, 2016).

Financial Services

Financial service is expected to be the immediate loser after the European Union exit than any other sector in the country. In the best case where passport rights were reserved, the United Kingdom used to lose its influence on the aspect of single market rules. There are chances that the economy would be hurt in the short run but not a peril. In general, the city’s competitive advantage is said to be founded on the unfettered access to single market. Exit to the European Union would allow the United Kingdom to be able to broker trade deals with other emerging markets that would later pay up dividend to the financial sectors in the long run (Barrett, et al 2015).

Productivity, Regulation and Innovation

Brexit is expected to have limited impact to British productivity. However, the core process of improvement may be experienced from the increased case in business investments that indicate little relation with political developments (Barrett, et al 2015). There are anticipations that the European Union regulations would save lot of money for Britain has exaggeration of the actual image since the United Kingdom would have to make decision of implementing some of them. As well, Britain would need to implement the union regulations to ensure that it continues exporting in the single market. With the aspect of reduced regulation, there are chances of offering little boost to the level of productivity but not a game-changer (Dagnis Jensen & Snaith, 2016).

Foreign Investments

There are concerns on reduced foreign investment after the country voted to leave the European Union. Access to the single market has not been the only reason to why firms opt to invest in the country. There are other advantages associated with investing in the economy which ensures that foreign companies wish to be foothold in Britain. Chances are that Britain would still be haven for direct investment flows despite been outside the EU. However, the country would have to experience a lower period of direct foreign investment since the country has to create new relationships. In case, the economy will be in position of obtaining favorable terms, foreign direct investment would have to recoup the process.

Property Market and Consumption

The fact is that the city is part of British property market that will have the most to lose after the decision by United Kingdom to leave the European Union. The demerits of this decision would have considerable impact but role of financial service sector is expected to hold up property market hence making everyone to have believes that negative impacts will be small mainly within the macroeconomic level (Dagnis Jensen & Snaith, 2016).


Generally, the impact of Brexit to the entire British economy appears to be uncertain. There are doubts if Britain long term economic outlook is hinged on this issue. Since the country joined the European Union back in 1973, things have changed in the economy. The decision of joining the EU emerged as a big deal or the country. Some of the most argued essential issues are whether the level of productivity in the country will have to recover. The decline experienced in the productivity level during the pre-crisis period exceeds 10 percent and regaining such would assist in offsetting the negative estimates associated with Brexit to the economy. It can be concluded that, there are no particular regions in the economy that would experience more impact than others from the decision to leave EU. As well, the notion of Brexit would be beneficial for some sectors rather than other with different range of outcome in the production being wider than in the service sector.


Barrett, A., Bergin, A., FitzGerald, J., Lambert, D., McCoy, D., Morgenroth, E. … & Studnicka, Z. (2015). Scoping the possible economic implications of Brexit on Ireland. ESRI Research Series, 48.

Boulanger, P., & Philippidis, G. (2015). The End of a Romance A Note on the Quantitative Impacts of a ‘Brexit’from the EU. Journal of Agricultural Economics, 66(3), 832-842.

Dagnis Jensen, M., & Snaith, H. (2016). When politics prevails: the political economy of a Brexit. Journal of European Public Policy, 1-9.

Dhingra, S., Ottaviano, G. I., Sampson, T., & Reenen, J. V. (2016). The consequences of Brexit for UK trade and living standards.

Irwin, G. (2015). BREXIT: the Impact on the UK and the EU. Global Council, London. Available online at: http://www. Globalcounsel. Co. uk/system/files/publications/Global_Counsel_Impact_of_Brexit_June_2015. Pdf.

Möller, A., & Oliver, T. (2014). The United Kingdom and the European Union: what would a “Brexit” mean for the EU and other States around the World European and global perspectives. DGAPanalyse.

Oliver, T. (2016). European and international views of Brexit. Journal of European Public Policy, 1-8.

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