How Brexit Will Impact UK Economy and How to Eliminate the Negative Impacts
The biggest question on everyone’s mind now is how Brexit will impact the UK economy. Our politicians are still wrangling over what a good Brexit ought to look like. It is not as easy to clearly define and explain the exact impact of Brexit on the economy because of a variety of factors.
What is Brexit?
Read the simple guide to the UK leaving the EU – BBC News to know about what is Brexit!
The outcome of negotiations and the actual effect of the March 2019 deadline are still shrouded in confusion and uncertainty. Nonetheless, we can speculate on what is likely to happen based on the current reality. It is even possible to predict the possible impact for up to ten years.
- UK’s biggest trading partner is not the US or China. It’s the EU, the same block we’re trying to divorce from. Well, most if not all divorces are often nasty.
- The UK will have more to lose from Brexit than the EU will. That’s a fact. The import and export balance will be affected, cost of production my spike up thus affecting the economy. This is certain regardless of whether there is a deal or no deal at all.
- An increase in import prices will lead to an increase in the cost of day to day goods we purchase from Germany, France, Netherlands, and so on.
- The cost of goods and services purchased by households will rise, and lower-income households will be hit the hardest. The cost and standard of living will most likely go up.
- Money that’s presently allocated for other needs will have to be redirected to meet the deficit incurred from the increased goods.
- Surprisingly, experts predict that households on the outskirts of London will be worse off than those located within London.
- Regions such as the Northeast rely on exports and imports as a source of revenue and will feel the pinch of Brexit.
- Production is expected to slump because of the uncertainty of the export tariffs that will be agreed upon on the deal. It does not make any sense for goods to be produced and sold as usual, only for the tariffs to increase suddenly.
- Companies might not be able to meet their production costs or make profits due to the uncertainty that’s hovering over the horizon. In fact, the uncertainty surrounding the aftermath of Brexit has a lot of companies with offices and headquarters within the UK nervous.
- Most of them already know that the move out of the EU will hurt the economy, but they cannot tell just how the hurt economy will affect their business. Why would they wait to find out the negative effects by experience when they could just as well exercise a cautious wait and see strategy?
- Some Companies are strongly considering moving their businesses or at least some of their major assets outside the UK. Unfortunately, should such businesses move, they will not take most of their UK employees with them.
- Terminating employees is one sure way of cutting costs. Sad as it may sound; people will lose work in the aftermath of Brexit. Rising unemployment is in no way good for the economy.
- Much effort will thus, have to be put in to make sure that companies are not adversely affected to the point of cutting back on employees.
- A lot of these expected impacts are based on the uncertainty of the Brexit deal that will be agreed upon. The messier and more uncertain the deal, the worse the consequences we can expect.
- Some ways eliminate the negative impacts of Brexit include concluding negotiations as fast as possible. Whether the deal is unsatisfactory, or there is none, at least there will be certainty as to where the UK stands. Consumers and businesses can then appropriately adjust themselves as per the deal. A concluded deal will eliminate the resistance and excessive caution that comes with uncertainty.
- Additionally, negative impacts can be eliminated by maintaining as close a relationship as possible with the EU. Favorable terms for the UK in the deal will not have consequences that are as harsh.
- The effects will be manageable for consumers and businesses alike. While this could be taken as wishful thinking, it does not change the fact that a close trading relationship with the EU is a win-win situation for all.
- Another way of eliminating these impacts is to work on bigger and better trading deals with the rest of the world. Engaging in trading activities with the rest of the world such as the United States, the Commonwealth and China would attempt to fill in the gap left by reduced trade with the EU.
The deliberations on how to eliminate the negative impact of Brexit cannot be detailed because of the many unknown factors.
We can only patiently wait for the results of the current negotiations and the effects after that. As a small or medium business, now is the time to start positioning yourself for a post Brexit UK.