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Brexit and Its Effects on the European Economy

BrexitJanuary 31, 2020, was a historic day for the European Union, for it marks the day the United Kingdom left the Union based on a public vote (referendum) held in June 2016. Seventeen point four million citizens opted for Brexit in 2016 and, after several negotiations and talks, the U.K. is now the first former member of the European Union. An important and large-scale decision such as this has the ability to distort economic stability greatly.

Trade

The EU is the world’s largest single market that allows free trade among all its members. It is also responsible for negotiating trade policies on behalf of its members, establishing a single, strong voice throughout various negotiations. Since Britain is no longer a member, it must create its own suitable trade policies with the countries it wishes to trade within the Union. Britain also needs to negotiate for its own demands. It was projected that the U.K. stood to lose $32 billion after Brexit, with no trade agreement in place between the U.K. and the EU. Losses incurred are more likely to increase as the EU accounts for nearly 46% of the U.K.’s exports. Researchers project that Ireland’s exports to Britain may drop by at least 10%. This creates a serious trade imbalance and hence contributes to the national deficit of the nation.

Food Poverty

British citizens consume a significant amount of imported food. Brexit could lead to a rise in food poverty, as about 30% of food is imported from the EU and 11% is from countries whose trade policies were negotiated by the EU. Since there is no trade policy in place, food insecurity is bound to rise. Food prices will likely rise 6% by June 2020, according to researchers. Overall, an increase in food poverty may be on the horizon.

Immigration

The U.K. had announced that post-Brexit only highly skilled immigrants will be able to secure jobs and the additional requirements have already created an impact on the economy. Immigrants mostly work low-skilled jobs and the implementation of this policy has already lead to shortages. At least one in 11 posts are vacant. Also, immigrants occupy nearly one-sixth (140,000) of the 840,000 care worker jobs. The new regulations will soon prompt vacancies and greatly affect people with disabilities and the elderly.

The Potential Solutions

Trade talks between the U.K. and the EU are taking place effectively. British Prime Minister Boris Johnson proposed a “Canada-style free trade agreement” which the EU is prepared to accept, given the fact that the agreement would demand no tariffs or quotas from them. This shows that negotiations are productive and that the U.K. is trying to cause very little disturbance to the economy. Aware of its reliance on imports from the EU, the U.K. has opted for a mutually beneficial free trade agreement. As the cost of imports and exports are reduced, the trade imbalances are corrected. This in turn will influence food poverty as the general price levels will decrease and imported food will become affordable.

Additionally, there are multiple organizations and government schemes that help combat food poverty in the U.K. For example, The Trussell Trust and other independent foodbanks have distributed nearly 3 million food packages between 2018 and 2019. The organization Healthy Start allows the purchase of basic food necessities for pregnant women and mothers with infants.

What Are the Benefits of Brexit for the UK?

The U.K. is free to trade with other nations such as Japan, the U.S. and India without EU restrictions. This will stimulate growth in all nations involved in possible free trade and help tackle domestic issues, such as unemployment and hunger. Effective trading can lead to increased employment opportunities and better living standards.

The U.K. has given almost half a trillion pounds to the EU to be a member of the bloc. The amount the U.K. will save is significant enough to be directed at rising food insecurity, short-term deficit and unemployment. The U.K. is also able to craft specific policies to suit its needs instead of being subject to the ones crafted by the EU. The ability to do this helps the U.K. and other nations involved, as all policies will be tailored to be mutually beneficial and appropriate.

Overall, Brexit is a challenge. It is difficult to adjust to and likely poses serious threats to economic stability in the near future. However, this is only a short-term issue. Once the transition period is over, a structured agreement between the E.U. and the U.K. will help their economies regain stability.

– Mridula Divakar
Photo: Flickr

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Brexit and Poverty in Britain

Brexit and Poverty in Britain
In 2016, 51.9 percent of voters in The United Kingdom voted for Britain to leave The European Union. This controversial decision left many scholars and politicians scrambling to predict what social and economic consequences would follow for the country. Many significant studies have been conducted on the possible effects of Brexit and poverty in Britain, but it is impossible to definitively know what repercussions the transition will bring.

In March 2019, the transition out of the EU is set to begin. Many facets of British life, politics and economics will be impacted by this shift, yet the effect of Brexit on poverty in Britain remains complicated and vague. Some may claim that Brexit will not increase British poverty rates while others argue that it will. Some of the most influential determinants of national poverty are healthcare, food security, and household income and expenditure.

Health Care and Medical Services

The British National Healthcare System (NHS) has historically been dependent on non-U.K./ EU nationals to contribute to the medical workforce. In 2017, 60,000 workers in the NHS were non-U.K./EU nationals. Since Brexit, however, many medical professionals have left The U.K. due to uncertainty about legal status and protections post-Brexit. Leaving the EU also makes recruiting international employees more difficult as there will be less recognition of professional qualifications received in other countries.

Immediately after the Brexit vote, the number of non-U.K./EU nurses applying to join the British nursing register fell by about 96 percent. Patients are being forced to wait over longer periods of time for treatment simply because there are not enough medical professionals available. This is a dangerous and potentially fatal repercussion of Brexit.

Food security

In the case of a no-deal Brexit, food security would suffer as 30 percent of the national food supply comes from the EU The country does not have a clear food stockpiling location as it is accustomed to importing food and consuming it rather quickly afterward. The EU is such a large provider of food for Britain that no other country could easily replace this supply.

The U.K. itself will have trouble producing enough to make up for the deficit since it faces its own problems with food production as a result of things like changing weather conditions. Many are concerned that a no-deal Brexit could cause catastrophic food shortages in the country.

Household costs and incomes

Brexit will have a negative impact on the ability of the U.K. to import any kinds of foreign European goods and services. Because of this, the prices of goods and services will increase. Of course, this will affect all populations in Britain, but it will be felt most intensely by poorer households who will not be able to keep up with these price increases.

On the other hand, it is possible that if Brexit may lead non-U.K./EU workers to leave Britain, there may be an influx of job opportunities in the country. This could mean that some poor British citizens may be able to find more lucrative work.

As Brexit approaches, the United Kingdom is beginning to take precautions to ensure that the transition occurs smoothly. Though there is disagreement on what a proper Brexit would entail, all seem to agree that the priority should be the protection of the British citizenry. The political and partisan debates over what Brexit will mean for the country can only involve precaution and prediction as no one can be certain what March 2019 will bring or what the effect of Brexit on poverty in Britain will be. One can only hope that the well being of vulnerable citizens will be considered.

– Julia Bloechl
Photo: Flickr