The Effects of Brexit on the UK’s Trade and Jobs
The fate of Brexit is a negative effect on the UK economy. EU leaders have discussed and suggested that the UK should be worse off after Brexit negotiations than it was before the country decided to leave the EU.
Certain UK industries will be hit harder than others, especially motor vehicles and parts, since these are the commodity with the highest proportion of trade between the UK and the EU. The UK is a prominent producer of motor vehicles and parts, as well as the second biggest seller of motor vehicles in Europe (second only to Germany). The EU also accounts for about 58% of the UKs vehicle exports.
The resulting impact of trade between the EU and the UK will depend on how Brexit negotiations play out. Higher costs of trade are a guarantee, but the amount by which they will increase is still an uncertainty. Most of the extra costs are likely to be placed on business where they will in turn be forced upon consumers.
Another sector which could face major drawbacks from Brexit is the services industry. According to a recent HM Treasury report, services account for about 80% of the total UK economy. The UK also has the largest share of export services of any major advanced economy. Many banks are already forming and executing plans to move their workforce outside of Britain. They are planning on moving anywhere from 15,000-80,000 jobs from Britain to mainland Europe in the next two years. Tax revenues could suffer greatly if a large number of wealthy tax payers move out of the country. Also, roughly one-third of London’s banking industry involves transactions for clients in mainland Europe. When Britain leaves the EU, most of this business could become effectively illegal.
Although, one positive impact of Brexit, in terms of trade, has been increased demand for certain UK exports. Due to the decrease in value of the pound, certain exports have become lower in price compared to European and American competitors. Goods such as British whiskey, salmon, and chocolate have recently been exported in increasing volumes. While a weaker pound may help some industries, it is detrimental for others. Factories which produce automotive, aerospace and medical devices import machinery from mainland Europe. With Sterling’s fall in value, the costs to import this machinery have risen, making business more difficult for these manufacturers.
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