BAHRIA UNIVERSITY

KARACHI CAMPUS

INTERNATIONAL BUSINESS ANALYSIS

ASSIGNMENT # 03

Class: MBA (WEEKEND) [3.5]-4 (B) Weekend

Date: 26/04/2020

Submitted By: Submitted To:

OSAID AHMED Sir Asif Shamim
Enrollment No: 02-220173-005
 The Impact of “BREXIT” on global trade and Economy particularly on UK
Economy

Many studies have looked at the overall impact of leaving the EU, the implications for jobs
and the effects on the public finances. International organizations, such as the IMF and the
OECD, have contributed to the debate, looking both at the impact on the UK, but also at
potential risks for the global economy, while the Bank of England has stressed its duty to
speak up when it identifies risks, in particular, to financial stability.

EFFECTS ON UK ECONOMY: -

 There have been many attempts to model the macroeconomic consequences of Brexit,
nearly all of which find that there will be a long-term loss of GDP for the UK
economy compared with the status quo projections of remaining fully in the EU and
its single market.
 The range of estimates is large, from a loss of GDP of nearly ten percentage points (in
the least attractive trade and inward investment scenarios modelled by the Treasury,
NIESR and the Centre for Economic Performance at LSE) to a gain of four points
(Minford, for Economists, for Brexit-a clear outlier)
 To the extent that there is a loss of GDP, it will also, in macroeconomic terms, mean a
lower level of employment in the UK economy.
 Demand from other EU countries constitutes around 12% of final demand for UK
goods and services and this translates into around 3.3 million jobs.
 The regional distribution of jobs could be influenced by shifts in the destination of
foreign direct investment into the UK, a pattern already seen following the 2008/9
recession when Wales, Northern Ireland and the more northerly English regions lost
ground.
 The direct effect of Brexit on the public finances will be to allow the UK to save on
its current payments into the EU budget.
 Any savings from direct contributions to the EU budget would be erased if Brexit
results in a GDP loss of as little as one percentage point and the public finances would
be worse if the loss were greater, despite no longer paying into the EU.
 There may well be opportunities for the UK to cut costly regulations, although some
of the amounts claimed exaggerate the likely benefits.
Effects on Global Trade: -

 There is a consensus, even including proponents of ‘leave’, that there would be a

short-term negative shock to the EU economy from Brexit.
 The second-biggest victim would be the euro-area, with the European Central Bank
estimating the region would feel a hit equivalent to a 10%-30% of what the U.K.
suffers. That's potentially the difference between slowdown and outright recession.
 A blowup over Brexit might not by itself cause a global recession, but it would
certainly trigger a European one, which would then spill over to other companies.
 Another risk is that, after being buffeted by months of trade tension and political
uncertainty, a no-deal Brexit is the proverbial straw that breaks the camel's back for
global sentiment. That could kick start0 a downward spiral in markets.
 A sure sign of concern over global growth can be found in the benchmark 10-year
Treasury yield. It's hovering just above 1.5%, down from 2.62% at the start of the
year and not far from a record low of 1.32% reached in 2016.
 The Bank of England's latest assessment of the "worst-case no-deal no-transition
scenario" is for a drop in gross domestic product of 5.5% from peak to trough. That
shows the magnitude of the damage that could be caused.
 "A really deep recession in the U.K. could very much push the euro area into
recession."
 The impact on Europe would be "unevenly spread: Ireland would suffer the most, and
then countries that export a lot to the U.K."
 Part of the problem for Europe is that the ECB has already used up much of its policy
ammunition in fighting the latest slowdown in the euro area, leaving it with little
firepower if Brexit sparks more serious turmoil.