What is the Effect of Brexit on the UK Economy?
Brexit was a decision made back in 2016. It is a decision that was not to be taken lightly. The whole country voted to see if they could survive on their own two feet without the help of the European Union. It comes as no surprise the effect this would have on almost all facets of the business. The trading of foods and goods and what can be readily available. The distribution of entertainment and media, even gambling sites with online slots may have to follow new rules. Here are more details into the real effects Brexit will have on the UK economy.
Effects of the Pandemic
According to recent research in April, the UK exports of goods have been able to recover even after the Covid restrictions. There was a record plunge in January during the first month of Brexit, but the exports have been able to rise to £3.7 billion. In other words, this is a 46.6% increase. This was the incredible adaptability of businesses during the pandemic. This was even during the pause of deliveries that occurred in the month before the lockdown. The fears over border disruption were also elated from this rise of convenience.
It is the exports of food and live animals that added the biggest contribution to the increase. The exact increase was around £300 million, which calculates to a massive 77% improvement. This began in February during the year of the Covid crisis. Fish and shellfish were said to be the most affected area of Brexit. The decrease in goods for this area was discussed in large quantities in the UK news. Thanks to the recovery, the exports of this service were improved significantly. However, levels in this area are still below expected margins.
Numbers Still Low
Even after the recovery, the overall economic rating is still smaller than what is hoped for (around 7.8% smaller, even before the Pandemic officially began). The recovery itself came from the businesses and families making preparations beforehand. Before preparations were made, the use of cars and machines was a big help in keeping exports coming. Medical and pharmaceutical companies were able to transport their goods safely to avoid decreasing numbers. These kinds of preparations were brought up in emergencies. The efforts were from those who were already struggling to meet numbers because of the recent low values before the pandemic.
Tade with the EU has taken a fall over the past year before the pandemic started. This was due to a combination of both Brexit and the pandemic. Even before that, the UK inflation was increased by 1.7% in 2017. For British homes everywhere, the annual cost had gone up to £404. The economic costs in 2018 were estimated at a rise of 2%. The Financial Times analyzed in December 2017 calculated that the British income was reduced between 0.6% and 1.3%. All of the evidence pointed towards a steady decline in profits. As soon as the income was affected, this triggered a reaction from outside sources.
Effect of Investors
Because of the decline, investors have begun losing interest in UK ventures. A study by Stanford University and Nottingham University discovered a correlation between the unpredictable nature of Brexit and the interest in investors. The number of investors lost interest by 6%. Even huge European firms reduced investments in the UK after the Brexit referendum reached a decision. The uncertainty of what could happen after Brexit leaves a lot of people unsure as to what the economic future could be. This, in turn, affects the economy even further because no one is willing to take the risk at the same level the UK is willing to.
The lack of investors has also had another unfortunate effect. This has caused a reduction in employment by around 1.5%. The lack of workers is a major blow to the economy as it can ultimately halt businesses altogether. Once again, the Covid pandemic further added to this. Britain has experienced its worst labor shortage in decades. According to Andy Prendergast, the national secretary for the GMB Union, it is now a seller’s market for workers. Some people claim that the labor shortage is from high demand and not Brexit.
There has been a major positive effect of Brexit. This has mainly affected corporations. There has been an increase in capital in corporate taxation. The UK can leave the EU’s debts behind and now focus on their taxes and funding. Britain can escape many of the EU regulations that keep them restricted in certain businesses. These restrictions also cost the UK a lot of money. This is money they can now save, and they are no longer obliged to follow them. It is said to be a slow process towards the true benefits of Brexit. The pandemic has made this process even slower. Only time will tell if long-term benefits will finally come to fruition.