Britain's referendum to leave the European Union, commonly called Brexit, was passed four years ago. Brexit resulted from Britain's Prime Minister, David Cameroon's plan regarding the United Kingdom's future within the European Union if the Conservative party won the general elections in May 2015. It was scheduled to become effective on January 31, 2020, but it went to full effect on December 31, 2020. This paper will discuss the effects of Brexit on global business. Brexit has a significant impact on reducing trade, immigration and business regulations, supply chains across countries, remittances, competitiveness, and investments.
Brexit has negative impacts on trade between the UnitedKingdom and the European Union. Several years ago, trade between the UK and the EU was the same as the trade between the EU and the US. The trade has since reduced following the implementation of Brexit.For instance, the 2017 European Parliament reported that all factors held constant. There is approximately 0.5 percent of the EU's accumulated GDPpotential losses on the goods and services trade. The losses are expected to be higher on the United Kingdom part at approximately 4.2 percent of its GDP. The statistics indicate that both the EU and the United Kingdom have experienced losses due to Brexit. Brexit also resulted in a significant decrease in the EU's capitalization and the EU's credibility in leading international financial services(Hoinaru&Năstase, 2019). Evidence indicates that Brexit has significantly affected trade in the EU and the UK and may also significantly impact the rest of the world.
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The withdrawal of Britain from the EU has a dramatic impact on the issuance of passports and ease of doing business within the country. Most of the business activities will be impossible due to security and regulatory restrictions. For instance, clearing activities will have to be adjusted based on the new relations between the EU and the UK. The new relations and regulations warrant changes or completetermination of existing contracts that extend beyond the Brexit period. New business agreements that align with the Brexit terms would need to be establishedby parties and companies (Hohlmeier&Fahrholz, 2018). International companies doing business in the UK have had to re-strategize following the changes in business regulations and policies that the country established after Brexit regarding goods and service delivery, labor, and business regulations.
The bilateral trade is not likely to halt suddenly after Brexit but will result in significant trade terms between the UK, the European Union, and the rest of the world. The alteration of trade terms would cause drastic shifts in the geographic patterns and magnitudes of trade flows. The alterations can have both positive and negative impacts. The negative impacts can be attributed to the changes in business regulations, and the countries can benefit from trade diversion. Trade diversions mean that there will be less trade between the European Union and the UK, paving the way for new trade partners (Mold, 2018).There is also a renegotiation of new deals between the UK and various countries. Australia, the US, and New Zealand are examples of countries in talks with the UK to set up new trade deals because the UK is free to create its trade policies different from the rest of the EU. Consumers have also begun paying more amounts for British goods due to the import duty of goods arriving in the EU from the UK (Henley, 2021). The changes are expected to stifle smaller businesses from exporting their goods to the continent. Brexit is likely to open up more business with countries outside Europe to take advantage of the trade gap between the UK withdraws from the European Union.
The supply chain of various countries has been affected by this decision. The changes to the boundaries set between the EU and the UK. There are no changes in taxes at the border, but new paperwork has been introduced, which has begun and will only lead to more delays and backlogs, especially at busy ports ( Edgington, 2020) . Northern Ireland will follow EU rules to avoid hardening its border with the Republic of Ireland. Goods entering Northern Ireland from the rest of the UK have to go through checks. Many industries will be affected by rules on the migration of foreign workers. For example, in the sports industry, football clubs will no longer sign any players aged below 18 years commencing the transfer window that began on January 2. Like other employees, players will be accepted through a point system based on their skillsets, with more skilled employees getting higher points.
Brexithas a significant impact on remittances, especially on the African Countries. African countries such as Kenya and Uganda are more exposed because they export numerous labor to the United Kingdom. Estimated data from 2015 indicated that Kenya received 523 million USD of remittances from the United Kingdom, approximately two-thirds of the country's remittance inflows. Uganda also has approximately a quarter of unit remittances from the UK, estimated to be 283 million USD in 2015. Brexit may result in higher unemployment rates and reduces economic activity for the migrants. The result is reduced economic activity for migrants (Mold, 2018). Brexit will affect the labour markets in the UK and may reduce the demand for foreign labour. The consequences of low rates of employment and economic activities for foreigners are a drastic reduction in remittances.
A major consequence of Brexit is the delay or reduction in investment by small and medium enterprises (SMEs). Brexit has led to major uncertainties resulting from the potential to change the regulations governing business for firms in the UK both domestically and internationally. The uncertainties in regulatory business policies are likely to affect small businesses in the UK. Existing evidence indicates that uncertainty has a significant impact on small and medium enterprises' decision-making process in terms of entrepreneurship, organizational theory, economics, strategic management, and corporate finance. Small and medium enterprises have lower resilience than large corporations and may have drastic financial instabilities in alterations in existing regulations (Brown et al., 2018). The outcomes of Brexit are likely to be increase uncertainty in business and reduce the willingness of international firms to invest in the country.
Brexit is also likely to result in competitive vulnerabilities and opportunities for different sectors and regions. There are likely deviationsbased on national circumstances across different countries. For instance, there is a potential increase in the already high international standards. Various specialized regions are also likely to take advantage of competitive opportunities at other competing regions' expense. Weaker macro-regions are likely to be hit by the increased competition compares to the prosperous sections of each macro-region. For instance, some areas may be negatively affected within the South of England, such as Essex, Kent, East Anglia, and Devon and Cornwall (Thissen et al., 2019). The existing inequalities in the competitiveness of macro-regions may increase with the UK's withdrawal from the EU.
This essay elaborates thatBrexit has a significant impact on world business as demonstrated by the impact on reducing trade, immigration and business regulations, and supply chains across countries, remittances, and investments.Brexit has been around for four years now but has officially begun this year, and effects will be felt henceforth. The uncertainty associated with Brexit and the establishment of new business and immigration regulations impact SMEs and large corporations.
References
Brown, R., Liiares-Zegarra, J. M., & Wilson, J. O. (2018). What happens if the rules change? The impact of Brexit on the future strategic intentions of UK SMEs. SSRN Electronic Journal . https://doi.org/10.2139/ssrn.3066614
Edgington, T. (2020, September 7). What do I need to know about Brexit now? A simple guide . BBC News. https://www.bbc.com/news/uk-politics-32810887
Henley, J. (2021, January 7). Customers in Europe hit by post-Brexit charges when buying from UK . the Guardian. https://www.theguardian.com/politics/2021/jan/07/customers-europe-hit-by-post-brexit-charges-buying-from-uk
Hohlmeier, M., &Fahrholz, C. (2018).The impact of Brexit on financial markets—Taking stock. International Journal of Financial Studies , 6 (3), 65. https://doi.org/10.3390/ijfs6030065
Hoinaru, R., & Năstase, M. (2019). A balanced approach: Brexit from political and business perspectives. Proceedings of the International Conference on Business Excellence , 13 (1), 804-816. https://doi.org/10.2478/picbe-2019-0071
Mold, A. (2018). The consequences of Brexit for Africa: The case of the East African Community ☆ . Journal of African Trade , 5 (1-2), 1. https://doi.org/10.1016/j.joat.2018.10.001
Thissen, M., Van Oort, F., McCann, P., Ortega-Argilés, R., & Husby, T. (2019). The implications of Brexit for UK and EU regional competitiveness. SSRN Electronic Journal . https://doi.org/10.2139/ssrn.3440574
