The United Kingdom held its referendum on European Union membership on June 23, 2016. Leave won with 51.9% of the vote, while Remain received 48.1%. After the referendum, Prime Minister David Cameron resigned and was succeeded by Theresa May. However, the public’s decision to exit the EU was followed by a period in which the transition was to take place up to 2020 (Ronalds, 2016). Brexit was viewed by many leaders all over the world as a dangerous step because it would greatly affect Britain’s relationship with countries within the European Union. The UK’s exit was debated by many countries and leaders; hence, the magnitude of the consequences remained uncertain and unpredictable and, as a result, caused disparities in the impacts (Srivastava, 2016).
Withdrawal Negotiations and Trading Concerns
However, before the exit, the UK and EU were involved in negotiations that continued for two years. Various concerns were raised by both sides, and they revolved around trade. The UK did not want to continue favoring unlimited EU immigration and also had to address the status of EU members living in the UK (Smales, 2016). The negotiations also addressed a cash settlement by the UK, while the country sought arrangements concerning customs unions. The country also addressed its concern about withdrawal from the European court system. Therefore, the UK’s withdrawal led to certain consequences ranging from economic effects to the free movement arrangements adopted by the EU (Ronalds, 2016). Brexit also had an impact on app development for digital businesses.
GDP, the Pound, and Market Volatility
When assessing the financial impact of Brexit on the UK, the fact that the UK had not adopted the EU currency has to be considered. The UK, therefore, had been operating under an independent currency (Smales, 2016). Studies showed that, according to estimates for Europe, increased protectionism in the United Kingdom after the exit could reduce GDP by about 2.2% by 2030. Therefore, if economic openness were embraced, the UK could outperform this scenario by adding about 1.6% to the country’s income by 2030. Brexit had two major trading periods that transpired after the referendum. The pound, however, experienced the biggest loss (Srivastava, 2016). Major uncertainties existed amid the economy’s attempt to avoid a sudden slowdown after the vote. It also caused market volatility, even in African countries.
Immigration Controls and Skilled Labor Needs
Brexit also influenced the immigration of EU members. However, the immigration rate did not necessarily change rapidly after Brexit. Immigration was a major issue in the referendum campaign. In controlling immigration, the UK could impose restrictions that would otherwise limit the movement of people into and out of the state. However, the government would gain the authority to impose a different immigration policy (Smales, 2016). Although immigration was a major issue behind the exit, various groups and firms were at stake because they argued that Britain was becoming a less attractive place for the kinds of professionals they required. These included engineering, healthcare, and construction professionals. Case studies also showed that, within European Union economies, British firms might be less likely to prioritize investments that would otherwise improve production efficiency.
Leadership Change and Political Uncertainty
The exit process, however, caused political uncertainty. This was first observed with the resignation of Prime Minister David Cameron. News of his resignation came after the referendum, and he later stepped down as prime minister. In his message to his successor, Theresa May, he discussed the transition in leadership (Sow, 2016).
Digital Talent, Startups, and Innovation
The exit from the EU greatly affected the technology and digital sectors. This posed a greater threat because firms could face difficulty recruiting, training, and retaining talented individuals from the EU. As a matter of fact, talented individuals from the UK were seen as limited in number compared with the demand for their skills (Srivastava, 2016). The issue of limited talent supply thus remained a challenge in the production of products and services. However, when viewed positively, as some analysts in the UK found, Brexit also offered opportunities for innovation in the country. Consequently, Brexit also represented freedom from some EU ties (Smales, 2016). This could facilitate innovation in the state and thereby make the state more attractive to startups.
Tariffs, Exports, and Labor-Market Flexibility
Prime Minister David Cameron and his chancellor, among others, predicted that there would be an economic crisis following a vote to leave, and an immediate crisis in the pound was experienced. In terms of tariffs, Britain risked losses due to changes in export costs (Srivastava, 2016). Tariffs can raise the cost of exports, making UK firms less competitive and their products more expensive. However, regarding labor markets, the United Kingdom would be free from certain restrictions imposed by the European Union. This would enable the state to exercise greater flexibility in labor markets. On the other hand, Britain would not agree to the unrestricted free movement of people and, therefore, adopted policies intended to control the number of skilled personnel entering the country.
Work Cited
Srivastava, Spriha, ‘Brexit tragedy no longer look like a’fait acompli’: Soros,’ CNBC, 30 June 2016. https://www.cnbc.com/2016/06/30/brexit-is-a-negative-shock-Soros.html [accessed 21 July 2016]
Sow, Mariama and Amadou Sow. ‘The Brexit: What implications for Africa,’ Brookings Institute, 21 June 2016.https://www.brookings.edu/blogs/Africa-in-focus/posts/2016/06/21-Africa-brexittrade aid-economy-sow-say [accessed 21 July 2016]
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