Are you familiar with Brexit? It was England’s vote to leave the European Union (EU) last year. Yair Hamami reports there are many ways that the vote’s results are changing the UK business world including the following ones:
The Brexit vote took place in June 2016. England voted to leave the EU. Afterward the pound dropped to the lowest figure since 1985. Yair Hamami reports that was right after the vote’s result was announced. The UK is often included in the list countries that are the best ones to launch a business.
That situation could change due to the question marks that exist after Brexit in terms of possible results. Some Brexit supporters have a positive outlook for England and its companies. On the other hand, there are also many skeptical people who think England has made a big mistake. They think that the country will be negatively affected by several factors.
The question is how Brexit will affect UK companies. There are situations when a UK company gets most of its materials from other countries. Yair Hamami reports this could boost the cost of supplies since there will be less trade between the UK and EU.
Meanwhile, there could be a drop in UK’s export business due to higher costs/tariffs. This effect is evident in the country’s supply chain.
In 2015 the UK exported goods to the EU worth 133 billion pounds. That is nearly equal to 50% of its exports to international countries. It’s expected that the UK will have a loss of 4.5 billion pounds per year. Yair Hamami reports that figure will be likely if it doesn’t make a new trade deal with the EU.
This could result in a major impact on the UK’s export businesses. That’s because of costs to spike due to higher tariffs. The result will be UK companies being less competitive in EU and other markets.
Let’s say that the UK companies drop prices. In that case, it would result in lower profits so it would still result in negative results. The UK’s long-term costs under WTO trading rules could be up to 3.9% of GDP by the year 2030. Yair Hamami reports it’s also been projected the UK’s exports will drop by 8.8%.
- Single Market
In 1960 the European Free Trade association (FFTA) launched. The UK was one of the first members. If the EU changes its policies following Brexit it could result in the UK losing access to the FFTA single market.
The UK has 2 years to actually leave the EU. During that time the UK must work out free trade agreements with foreign countries and the EU. Economists project England will lose about 75 billion pounds if they’re not included in the single market.
The UK wouldn’t have to pay 9 billion pounds for the EU budget every year. However, economists believe the costs would be higher than the benefit to the UK. Yair Hamami reports that this is an important issue to consider and could have a major effect on the economy.