Brexit and Economy: Business Economics Assignment

Brexit and Economy
Business Economics Assignment
Abdu Samad M
ROLL NO. = 1 , CSE S3
Introduction
As part of my Business Economics syllabus, I have
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been asked to submit an assignment on a topic of
my selection. The topic must be related to the
international or Indian economy. I chose the topic
“Brexit and its effects on global economy”. It is one
of the most discussed economic topics of the year.
As a student I was intrigued to know more about
the widely discussed topic and form a general idea
and opinion about it. That is why I selected the
topic.
What is Brexit ?
Brexit is an abbreviation for "British exit," which
refers to the June 23, 2016, referendum whereby
British citizens voted to exit the European Union. In
which 52% of votes were cast in favour of leaving
the EU, Prime Minister Theresa May announced
that the government intended to invoke Article 50
of the Treaty on European Union, the formal
procedure for withdrawing, by the end of March
2017, which, within the treaty terms, would put the
UK on a course to leave the EU by the end of March
2019.
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European Union
European Union is a politico-economic union of 28
member states that are located primarily in Europe.
It has an area of 4,324,782 km2 (1,669,808 sq mi),
and an estimated population of over 510 million.
The EU has developed an internal single market
through a standardized system of laws that apply in
all member states. EU policies aim to ensure the
free movement of people, goods, services, and
capital within the internal market
European Union and UK

1957 The Treaty of Rome was signed by 6
European states
1967
1973
The European Community was established
Britain joined the European Community.
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Tory Prime Minister Edward Heath took
Britain in.
1975 Labour Prime Minister Harold Wilson had a
referendum on Britain’s membership – the
last national referendum this country has
had. 66% voted yes – to stay in the
European Community
1987 The Single European Act was signed. This
was to create an internal market; “an area
without frontiers in which the free
movement of goods and persons, services
and capital is ensured.”
1991 The Maastricht Treaty was signed. The
heart of this was to create a single
European currency so that Europe as an
entity had a currency to challenge the
international supremacy of the dollar.
Britain, led by Tory Prime Minister John
Major, pushed for and got an “opt out”
clause for Britain. This meant that we were
part of the European Community and
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wanted to be a part of it, but not to
participate in a single currency.
1993 The European Union was formed
2002 The Euro was introduced on January 1st.
Britain has it Five Tests – if these are
answered successfully, then Britain will join
the Euro. British public opinion does not
appear to support the Euro as the first
month of its life draws to an end.
2004 Tony Blair and Jacques Chirac clashed
during negotiations over the European
constitution, with France concerned that
concessions would create a “two-speed
Europe”. The plans later collapsed after
France and Holland voted against them in
referendums.
2012 A poll this year suggested British voters
have been moving away from the Tories
and towards Ukip as a result of their hard
line on the EU.
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2016 A troubled Eurozone and an ongoing
migrant crisis has increased anti-Europe
sentiment and the success of Ukip in the
2015 election. In the wake of this, Cameron
announced in February this year that a
referendum on Britain's membership of the
EU would take place on June 23.
Main Causes of Brexit
1. Opponents of the EU argued that it is a
dysfunctional economic entity. The EU failed to
address the economic problems that had been
developing since 2008… for example, 20%
unemployment in southern Europe
2. Sovereignty - The second reason for Brexit is the
rise of nationalism across the world. There’s a
growing distrust of multinational financial,
trade, and defense organizations created after
World War II. The EU, the IMF, and NATO are
good examples of this. Many who oppose the
EU believe these institutions no longer serve a
purpose.
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3. Political Elitism - Finally, the political leadership
of Britain faced a profound loss. The “leave”
voters rejected both the Conservative and
Labour parties. Both parties had endorsed
remaining with the EU and saw many of their
members go into opposition on the issue.
Ultimately, it was a three-way struggle. Two
established parties wanted to remain in the EU,
and a third faction, drawn from both parties,
opposed it. People in this third group saw both
of the establishment parties as hostile to their
interests.
Imminent Effects of Brexit
1. Equities fall as investors flee risky assets and
generally worry about growth.
2. . Bond yields for “safe” government bonds fell
as investors moved into them. British bond
yields fell probably because investors are
betting the British have to cut rates now in
response to the panic. German and US yields
also fell as investors piled into them in a flight
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to quality.
3. Riskier bonds for weaker Eurozone economics
took a hit. Like Portuguese, Italian, Greek and
Spanish bonds
4. The value of the pound decreased rapidly
causing alternatives like yen and dollar gaining
on it (The pound was worth $1.50 on 23 June. It
is now trading at around $1.30 – down about
13%. Sterling has not been at levels this low
against the dollar since the mid-1980s.)
Future Risks or Long Term Effects
1. Inflation - The latest inflation results for June
2016 indicate there was a 0.5% rise in the
consumer prices index. This compares prices in
June 2016 to prices in June 2015.Next release
will be the first to show us what inflation was
like in a month fully after the referendum vote.
2. Housing and Property - The Bank of England’s
regional agents survey found that there was a
dip in housing market activity after 23 June, but
that transactions had so far proved to be more
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resilient than some had expected.
3. Unemployment - The most recently published
unemployment figures show there were 31.7
million people in work and 1.65 million people
unemployed. However, these figures are based
on comparing the three months to February
2016 and March to May 2016.
4. UK’s Economy and GDP will face a negative
impact for at least two or three economic years.
Conclusion
In summary, we come to the conclusion that a
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Brexit would have damaging effects on the
economic development in the entire EU. Apart
from these economic disadvantages, a Brexit
would also cause severe political damage and
would weaken Europe geopolitically. Therefore,
we are deeply convinced that a Brexit should be
avoided because it would create no winners, only
losers.
Reference
en.wikipedia.com
www.forbes.com
www.investopedia.com
www.theguardian.com

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Business Economics Assignment

European Union and UK

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