Economics Complications For UK - Free Sample & Solutions

Question: Discuss about the Economics For Managers for Economic Complications for UK. Answer: 1. As stated by Curry (2016), Brexit refers to the exit of United Kingdom from the European Union. In the year 2016, 52% of the voters in UK, voted to leave the European Union thereby leading to political and economic complications for UK and other countries . The article which assesses the case study of Brexit under the name Brexit what would happen if British left the EU? published in the Guardian, dated 14th of May , 2015 This article focuses at discussing the impact of Brexit on growth, trade, jobs, immigration and position in the world. Growth mixed feelings are generated on the effect of growth for Brexit. As stated by Boulanger and Philippidis (2015), various attempts have been formulated to seek the effect of Brexit on the UK economy. On an early estimation in 2004, that an exit would lead to a loss of 2.25% if UK GDP. According to an analysis done by the Centre for Economic Performance (CEP), the consequence soft Brexit would lead to a fall of income ranging between 6.3% to 9.5% of GDP. By being under free trade agreement (FTA), there might be a reduced fall in GDP of the UK, that is 2.2%. A mixed opinion of Thinktank Open Europe states that where an exit leads to a 2.2% loss of GDP by 2030, on the other hand, UK enters into independent trade policies with the world. Therefore, it could be better off by 1.6% of GDP by 2030. According to Tim Congdon contradictingly UK is 11.5% of GDP worse off for being a member of the union (Brugge et al. 2016). Trade According to the latest survey done by the British Chambers Of Commerce, 57% of the businesses are of the belief that being with the union would be positive. According to the office of national statistics data, there is a reduction in goods exported to EU and an increase in the goods exported to other countries in 2015. Iain Mansfield stated that UK would be beneficial by pursuing free trade with the with the world and it should engage with the organizations like G8, G20, and OECD. According to CBE, there is a tricky situation of negotiating trade after Brexit, as EU has 500 million consumers whereas, UK just has 65 million. Jobs There are 3 million jobs in UK depends on the EU membership. According to some firms, Brexit would cause a significant loss as it helps in attracting foreign companies. When some firms decide to take their companies out , other firms have planned to scale back to UK. Two sectors that hold a particular mention are the car and financial services. EU membership boosts UK businesses in the car industry and therefore, employment. This results from the funds and research development funds provided by EU. The scenario shows that leaving EU would leave a serious impact on the economics growth and jobs in UK. (Dhingra et al. 2016). Immigration According to the experts, British had access to single market before the brexit took its toll. Citizens freely moved from one country to order among the member countries of European union. With the formation of brexit, the scenario totally changed. The people of European union are equivalent to the people of the third world countries. Immigration in UK would be much difficult than it was before. This would create a retaliation effect over the UK immigrants staying in the European unions. Status in Europe As per Hume (2016), Brexit aims at diminishing the status of UK and EU in varying degrees. According to Roger Liddle, a single market would be beneficial for the country, than the costly, antisocial attributes of the Eurosceptic. According to an analysis, UK could overtake Germany as the most populous country by 2040, and can channel transatlantic influence as one of the EU's biggest trading and political partners ,whereas, Tim Oliver of the center for transatlantic relations states his vision that UK would be the junior partner. This would lead the state to negotiate for free trade as a weak member. On being compared with other with countries who were not associated with EU such as Switzerland and Norway, in the post-Brexit era, the UK has the little hard energy to export, and it has no land boundaries. Brexit would lessen the opportunities for future students to study in Britain. If a continent looses its political and market share, managing them is quite difficult (Krause, Noth and Tonzer 2016). Position in the world- Brexit would reduce rather than enhance the countrys position. According to the countries of the world, Brexit would result into unique changes once it breaks the ties with the European union. If it leaves EU, UK would be worse off. Only time will unfold what the actual consequences may be. Regardless of whether Britain exits on a good or bad note, there will be a decrease in trade. 2. Brexit aims at UK leaving the association of EU. This would increase the prices of British exports and reduce the economic activities and production. Prices for imported goods and services would rise for British consumers. Future predictions stated that there would be a 0.6% drop in UK GDP by 2030, that what it would have been by being a member of the union. By being isolated the percentage of drop in GDP might even be increased to 3% by 2030 (Dhingra, Ottaviano and Sampson 2015). With less trade, there would be less competition from international borders. This would result in callous nature of the companies to improve the quality of their goods. A lower increase in productivity would creep in which would reduce the long-term rate of economic growth. Analysis conducted by the economists at centre for economics performance, states that with Brexit into action, UK might suffer a fall in income of the range 6.3 % to 9.5% of GDP (Fry 2016). Figure 1: fall in the demand for goods and services in UK (source: as created by author) In figure 1, AD1 and AS are the aggregate demand and supply curves for the exports of goods and services pre-Brexit. With the exit of UK from the European Union, there is a fall in the demand for exports as now, the demand curve shifts rightwards from AD1 to AD2. This decrease in demand results in a fall in the price level from P1 to P2 and fall in the GDP from Y1 to Y2. This figure illustrates the scenario of the effect of Brexit on the UK economy. Some optimistic are of the view that if free trade prevails, in spite of Brexit, then the fall of GDP would be much lesser as predicted. With the fall in GDP rate, a negative impact over the economic and political situation of UK would be seen in coming future. The investors would dump different assets including shares and bonds. There would be a fall in the pound-dollar ratio and a rise in unemployment would creep in and the country might loose its financial status. There would be high chances of uncertainty over Britains economic failure. European Union was originated from the European Coal And Steel Community (ECSE) and European Economic Community (EEC) formed in 1951 and 1958. It was formed by six countries of Belgium, France, West Germany, Italy, Luxembourg, and Netherlands. The organization was named European Union which is an association of twenty countries. Each of the countries which belongs the association is independent in nature, but they agree to the rules stated by the nations. EU it allows free movement of goods, capital, services and people between the countries. The EU economy generates a GDP of around 14.303 trillion according to IMF.The aim of the EU is to unify the whole western Europe, to create a unified market system as means of providing stability to the markets and prevent division amongst the unified colonies (Wallace, Pollack and Young 2015). 3. As stated by Bianchetti et al.(2016) ,on the application of Brexit, a major issue grows that results in strict control over the immigrants of UK. Many people are concerned as this would hurt their jobs, wages, and quality of life. After Brexit comes into action, it would remove the associations of free movement of people among the EU and the UK. This would lead to strict rules faced by the EU citizens as it would be faced by the third party nations. New regulations would be set that would need the proofs regarding the work, as income proof, time limit of stay and the intention of work. People who plan a longer stay would have to show an employment proof. As stated by (Crafts 2016), the border between Northern Ireland and the Irish Republic would serve as the external source of entry EU immigrants to enter UK. The number of immigrants from other EU countries has raised to 3.3 million. Whereas, nearly two million UK immigrants also stay in other European Union countries. Hence, the strict rules for the EU immigrants would result in a retaliation of those UK immigrants by staying abroad. British people would end up applying for visa every time they plan to travel across the English channel. Retaliation from EU would pose a significant issue for the UK immigrants staying in other European countries. It has a direct effect on the UK immigrants in other EU countries. Hence, Britain would consider the EU citizens up to a certain level. 4. The exit of Britain from EU, the financial market, the investors of the Australia would be affected. However, Boulanger and Philippidis (2015) argued that this Brexit would not reflect to melt down of the economy. As UK did not maintain the trading partner with the economy like Australia, Brexit would not directly affect the trade of Australia. In this respect, Scott Haslem supported that only 4% of the overall production of the manufacturing goods exports to UK as well as by 5% to EU with the comparison of remaining 75% of the emerging markets. Therefore, Dagnis Jensen and Snaith (2016) mentioned that if UK left from EU, then Australia can negotiate a several deal with Britain. On the other hand, it can be criticised that the shock to the international markets, which have a positive impact on the overall world economy. This would again depress the confidence of both the businesses and the investors as well. In addition, Haslem added that in this type of investment uncertainty to the global economy development, Australia hold the lower position. On the contrary, Alan Oster, the chief economist of National Australian Bank stated that the prediction regarding the economy of Australia can be identified based on the economy of UK. Hence, he pointed that the trading position of UK along with the EU, would not break up to close down, as this was higher since for the two years of negotiations in case of trading agreements with EU as stated by mckee and Galsworthy (2016). Brexit also has an impact on the rate of interest of Australia. If Fed does hindrance the interest rate hikes, this would lead to the Australian dollar to be high relative to the RBA. This in turn could enhance the odds of RBA by cutting down the rate of interest and as a result, this outcome or approach would be able to stimulate the economy and lowering down the rate of Australian dollar. Instead of this, reduction of the rate of Australian dollar has an adverse impact on the Australians, who have pensions along with the other assets in the market of UK. In addition, the power of spending of the British tourists would be reduced. Moreover, Dhingra et al. (2016) cited that Australian stock market also tends to decline due to the increase of the uncertainty. As a result, the investors of this country would try to adopt risk off principle. Bonds reflect to lowering down the investors by engaging in the flight to quality. As per the opinion of macshane (2015), the support of Brexit refers to the shorten government might not be able to spend the money in case of protection of the economy of Australia. Moreover, government cannot also be capable to spend for the development of the health and the education of this mentioned economy. As a result, labour is needed to recast its economic strategy. 5. According to mckee and Galsworthy (2016), due to Brexit, UK has been suffering from the net loss of the economy. It can be observed that the exit of Britain from Europe reduced the GDP of United Kingdom by the amount of 2.25%. The reason can be discussed as due to the lowering down of foreign direct investment. In addition, as per the estimation of Centre for Economic Performance, United Kingdom can face the problem of falling down of income between the ranges of 6.3% to 9.5%. As a result, this has a negative impact on the global economy. In the words of Oliver (2013), the exit of British country from the EU, would decrease compared to increase the global economys influence as well as standing. This case has been observing in the countries like Washington and Beijing. On the contrary, it can be observed that in the economy like India, there was a most important colonial relationship with UK, therefore, Brexit could not affect Indias economy even if the trading situation of UK has declined. In a synopsis, voices of the other nations would provide the lower rate of comfort to the account of Britain. Moreover, it would be able to regain the unique as well as booming voice in case of the global economy affairs at the time of breaking of collective European identity. Again, Springford and Whyte (2014) criticised that India is seemed to the highly significant exemption to the consent of lesser UK outside of the EU. As per the statement of Ivo Daalder, the previous USA ambassador to Nato as well as the preset president of Chicago Council, this principle has a positive influential effect, which is increasing within the global economy outside of the EU. This power will reflect to retain the greater leadership within EU. On the other hand, in case of China, Weiler (2015) mentioned that UK is effective in terms of the financial centre. Nevertheless, from the point of view of overall political and the trading power, it is seemed to the significant and proportionate in case of the performance of role in EU. Again, Feng Zhongping argued that, UK, France, Germany or the other European countries is not capable to change the overall economy. However, it is known that EU is familiar as the largest market and the highest trade partner of China. Therefore, Boulanger and Philippidis (2015) opined that with the left of United Kingdom, EU would be more affected compared to UK. In addition, the strategic connection between United Kingdom and India, the several factors, this is underlying the different techniques, can recognise the British identity. China could not eligible to experience these ties due to the trading restrictions, is highly seek to UK as the smaller part of the European trading bloc. Moreover, Washington tried to construct and maintain a strategic connection with United Kingdom, however, arise the question regarding the Brexit due to the several reasons (Dagnis Jensen and Snaith 2016). Reference Boulanger, P. and Philippidis, G., 2015. The End of a Romance? 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