EU, have you lost a Pound or two?

Whosoever said that the sun shall never set on the British Empire might be a soul well rested today. In a shocking yet expected turn of events, Great Britain pulled a House of Stark on the Seven Kingdoms, otherwise known as the European Union (EU), on 31 January 2020. When Nigel Farage, a former member of the European Parliament, said, “We love Europe, we just hate the European Union”, it sent a ripple across all the European institutions, stating very clearly where Great Britain stood: they are a force too big to be bullied and too proud to get undermined easily.

While the talks and negotiations are still in the preliminary steps, the future of Great Britain as an independent trading nation depends on a number of factors. Since in the European Union, the movement of goods, services, capital, and people are four important pillars that support its smooth functioning, it will be important to notice what the impact of Brexit is on these. While the general consensus expresses the statement that Great Britain will suffer economically under this referendum, in the due course of time their profits and growth rate may stabilize. However, in the current state of affairs, the Pound is seeing a steady decline in value, having decreased by 11% in value and still with a decrease on the horizon. Facts and figures also point in a general direction, which shows that the only rise that Britain may see, would be in its fall. 1

Trade is one of the major aspects that will see a change in the coming years. These changes are heavily influenced by factors such as transportation costs, tariffs, and non-tariff barriers. It is also estimated that the Gross Domestic Product (GDP) is bound to decrease drastically for Great Britain, and depreciation as low as six percent is estimated to be recorded in the span of two years. This will cause a chain reaction of huge unemployment to dip the value of Sterling to be incurred, leading the country into a pseudo-recession of sorts.

Moreover, several factors would come into play once Great Britain leaves the EU. Firstly, every sector, be it businesses or households, will have to get used to a relatively lower-income style of living, which would be even more magnified if they refrain from being a part of the Single Market concept also. Secondly, as the delay in talks from October 2019 to January 2020 have shown us, all trade deals and domestic sector mechanism will be in jeopardy. This will primarily be because all the corporations that come under the umbrella of these categories will have to put on hold temporarily, as they will have to wait till all the negotiations are done. This way, the type of deal that is cut out will also need to be studied and its effects on the institutions will also need to be estimated. Thirdly, financial forums will have to recheck the situation in Great Britain concerning foreign investments, so that they can invest in the country without having to worry about losing their money incessantly. 2

An interesting point to note about the Brexit is that it not only is an argument between UK and EU States, it is also between the people who are pro-Brexit and anti-Brexit. So, it is like an internal turmoil and external trouble situation. The pro-Brexit individuals believe that there is no need for their great nation to provide money to this institution, which is only getting redistributed to other nations. However, anti-Brexit individuals believe that leaving the EU and its lucrative Single Market and free trade regimes would wreck the British economy left, right, and center. Yet again, conservative Britain inhabitants believe that if non-UK citizens were to get work visas in their land, it would increase competition for them and they would present a challenge for the already limited resources and jobs. The third argument is fairly typical to comprehend, and this is because it bases facts more on a moral ground rather than getting into the technicalities. All these can be explained in the way that the people who want the Brexit to happen simply believe that Great Britain has always had a separate identity in the international community and would like for it to remain so. Furthermore, the ridiculous and seemingly petty EU laws which the UK has to abide by basically add insult to injury. 3

All these factors, technical figures, and numbers can only be indicative of one thing: which is that irrespective of the final verdict on the type of deal being cut out for the UK, it shall spark a butterfly effect on the economies of leading world nations, and while the European Union gets ready to lose a few Pounds, the rest of the world is going to feel their calories burn.

(edited by Vaishnavi Deepak)

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