A211 BWFF 3043

INTERNATIONAL FINANCE

WRITING ASSIGNMENT
My Opinion on possible impact to the European countries due to Brexit

NAME:YATHAVI RAMASAMY
MATRICS.NO:272990
GROUP: B
PREPARED TO: Dr. Hasniza bt. Mohd. Taib

Date of Submission:
30th DECEMBER 2021
 In a June 23, 2016 vote, the United Kingdom chose to leave the European Union (EU).

After Brexit on Dec. 24, 2020, the UK and EU agreed to a temporary free-trade deal that

eliminates tariffs and quotas.

Trade in services, which accounts for 80% of the UK economy, remains unclear. This

avoided a no-deal Brexit, which would have harmed the UK economy. The citizens

determined that the advantages of free commerce didn't outweigh the downsides of open

borders. 17.4 million voted to leave, while 16.1 million opted to stay. The transition phase for

the UK's withdrawal from the EU ended on December 31, 2020. (EU).

The Trade and Collaboration Agreement includes three basic pillars: trade, cooperation,

and governance. Notably, the deal excludes foreign policy and defence. The UK has left the

EU's customs union and single market. There are no taxes or quotas on items traded that meet

the relevant origin requirements. Brexit strained Northern Ireland's ties with its EU

neighbour, the Republic of Ireland. The new deal permits Northern Ireland to join EU

customs standards, removing the need for a hard border. There is no land border between

Great Britain and Northern Ireland, just a sea boundary.

The UK-EU free movement agreement terminated. European citizens already in the UK

must ensure they have valid residency papers. Passports are required for travel between the

EU and the UK. Business travellers have unique needs. It depends on how often they conduct

business in an EU nation. A tax may be levied on services like telecommunications and

television. While the UK is no longer bound by EU law, it will continue to work with the EU

on criminal justice issues.

 Brexit already affects the UK. Because of this, numerous enterprises have shifted to the

EU. This would affect Ireland, London, and Scotland. Brexit harmed UK economic growth.

That the end result is unknown is partly to blame. Uncertainty about Brexit slowed UK

growth from 2.4% in 2015 to 1% in Brexit would impede growth by 6.7% over 15 years,

according to the UK. It assumed existing FTAs but restricted immigration. On referendum

day, the pound fell from $1.48 to $1.36. Exporters profit, while import prices rise. No pre-

Brexit euphoria.

Employers are struggling to locate candidates. One explanation is that EU-born

employees fled the UK, dropping 95% in 2017. This has struck low- and medium-skilled

workers the hardest. The UK must negotiate new trade deals with non-EU nations, since the

EU already has over 40 accords with 70 countries.UK retains Northern Ireland. Its neighbour,

the Republic of Ireland, remains an EU member. In exchange, the two Irish nations avoid a

customs border. It concluded in 1998 with the assurance of no Northern Ireland-Ireland

border. If there had been a customs barrier, 9,300 commuters would have had to travel

through it.

Brexit has already slowed growth in London, which was just 1.4 percent in 2018 and was

close to zero in 2019. Between 2016 and 2019, Brexit decreased business investment by 11%.

Fewer international firms use London as an English-speaking gateway to the European

Union's economy. Scotland voted against it. It thought that remaining in the EU was best for

Scotland and the UK. It has pleaded with the United Kingdom to grant a second vote.

Scotland must have an independence referendum in order to depart the United Kingdom. And

then seek for EU membership alone. Even so, Britain's economy has been impacted by the
EU referendum. In 2018, the country's GDP grew by 1.4 percent, down from 1.9 percent in

2017 and 2016. The Bank of England lowered its 2019 growth prediction to 1.2%, the

lowest since the financial crisis began. The UK unemployment rate fell to 3.9 percent in

January 2019, a 44-year low. Many firms choose to keep employees over investing in new

significant initiatives, say experts.In 2018, the country's GDP grew by 1.4 percent, down

from 1.9 percent in 2017 and 2016. The IMF anticipates a 1.3% growth in 2019 and 1.4% in

2020. 37 The Bank of England lowered its 2019 growth prediction to 1.2%, the lowest since

the financial crisis began.

The pound recovered some of its post-Brexit losses in 2018, but fell as the prospect of a

no-deal Brexit grew. Brexit might be postponed or a "soft Brexit" agreement enacted. While

the pound's depreciation benefited exporters, the greater cost of imports benefited consumers

and boosted the yearly inflation rate. However many free trade treaties Britain negotiates,

Brexit is predicted to reduce global commerce.The pound began 2021 around 15% lower

against the euro than it was on the eve of the UK's EU vote in June 2016. The pound was also

20% lower than when the EU Referendum Act was signed in December 2015. Brexit has

influenced exchange rate volatility and the pound's value versus other major currencies

during the previous five years.

Financial institutions sold the pound because they expected more trade frictions between

the UK and its main trading partner, as well as increased uncertainty and political instability.

As more companies sold sterling assets, the pound's value fell against other currencies. The

pound may also suffer after Brexit due to the UK's massive debt. The UK national debt will

have risen to 1.72 trillion pounds by the referendum date. This is almost 90% of the country's
GDP (GDP). A euro flight may be possible if the UK withdraws. Losing the UK jeopardises

the EU's political and economic stability, already hampered by internal strife and financial

concerns The dollar has clearly benefited from the recent African upheaval.

Experts anticipate a Brexit will hit the pound more than the dollar. In spite of a dollar

decline, the euro may rise versus the pound. This might cause overvaluation or

undervaluation of the euro, causing turbulence in the FX markets. Given its economic ties to

both the EU and the UK, Asean is not immune to the effects of Brexit. The volume and flow

of Asean exports to the EU and the flow of FDI in the other direction are often used to

determine exposure.

In 2014, the Asian Development Bank and the International Trade Centre reported that

Vietnam and Thailand exported the most to the UK, at US$4.8 billion (RM21.1 billion) and

US$3.6 billion, respectively. According to the European Commission, the major Asean

exporters to the EU were Vietnam (€33 billion) and Malaysia (€22.2 billion). The EU

accounts for 16.7% of FDI into Asean, totaling over US$19 billion, with the UK accounting

for one-third. With globalisation, production has grown increasingly fragmented, with things

made less and less in one nation by one enterprise.

As a consequence, substantially more global commerce occurs in components and parts

than completed goods. In 2015, the World Bank estimated 20% of global commerce was in

intermediate products. Notably, Asean has increasing industrial networks spanning numerous

states, with significant levels of unfinished product trafficking in and out of the region.

Malaysia, Singapore, and Brunei have the highest EU value added export share. Further
analysis of Asean trade data reveals the importance of EU value added in Asean exports to

several important sectors. The EU accounts for over 10% of Malaysia's total gross export

value. Thailand, Asean's top car exporter, credits the EU with 6.4% of overall

exports, while 4.Also, Malaysia is not directly affected by Brexit. Since the UK is not one of

Malaysia's top 10 trade partners, only indirect effects were expected. It is unlikely that the

British recession would lead to lower demand for Malaysian items.

Although the Malaysian economy is not directly threatened by Brexit, the indirect

diversification impact that is not represented in the markets may pose a problem. Investors

may sit back and watch for a long period without taking action. This lack of investor interest

may impact the general market sentiment and eventually damage the currency. Malaysia

would benefit if the UK tried to extend its trade connection outside the Eurozone.

Due to the nature of the medium, short-term European direct investment will be

unaffected. Stocks and debentures, however, were likely to be impacted by transient events.

Malaysian enterprises with UK involvement are confined to property development, regulated

assets and casinos. Thus, the null hypothesis is that the Brexit news had no effect on

Malaysian construction firm stocks.

First, when Brexit was announced, internet customers panicked. The ASOS website

went down for a day, although they said it was due to a power failure and not the Brexit

declaration. Because GBP rates are falling, purchasing on sites that take GPB will enable

Malaysians to save money. A cheaper getaway is arguably the most immediate and evident

impact of a currency decrease. Because of the currency decline, Malaysians could obtain
more for their GBP. The current rate is RM5.50 to 1 GBP, down from RM6 at the start of

June. Malaysians may save on hotel, dining, and retail expenditures.

UNESCO recognised the UK as the second greatest education destination out of the top

20 nations. Meanwhile, Malaysian students choose to study at British colleges and

universities. The UK education industry is projected to stay robust despite Brexit, and its

choice to quit the EU should benefit Malaysian students. The quality of education provided to

pupils is projected to remain unchanged, and the cheap exchange rate benefits most

Malaysians.

REFFERENCES

1. Bennett, Coleman & Co. Ltd.,2021.Definition of brexit.Retrived from

https://m.economictimes.com/definition/brexit/amp

2. Benjamin Mueller,Jan 31 2020.What is brexit?What happen next?,Retrived from

https://www.nytimes.com/interactive/2019/world/europe/what-is-brexit.html

3. Benjamin Mueller and Peter Robins,Nov. 8, 2021.What is brexit and how is it going?

Retrived from https://www.nytimes.com/article/brexit-uk-eu-explained.html

4. Kimberly Amadeo,March 12, 2021.What is brexit?How did it impact the UK,EU and

the US?Retrived from https://www.thebalance.com/brexit-consequences-4062999

5. The London Economic.Brexit effect on Euro exchange rate.Retrieved from

https://www.thelondoneconomic.com/lifestyle/money/brexit-effect-on-euro-

exchange-rate-200178/amp/
6. De Gruyter November 29, 2019. Brexit and its Impact on the Pound in the Foreign

Exchange Market.Retrieved from

https://www.degruyter.com/document/doi/10.1515/ev-2019-0026/html

7. Mr. Eugenio M Cerutti, Mr. Adil Mohommad, and Mr. Ghiath Shabsigh,15 Nov

2019.What Could be Possible Spillover Effects of a Potential Trade Agreement

Between the U.S. and China?Retrieved from

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8. Janio,26 Nov 2018.Brexit,What it could mean for Southest Asia.Retrived from

https://janio.asia/articles/brexit-effects-on-trade-southeast-asia/

9. Department for International Trade and The Rt Hon Liam Fox MP,6 April

2017.Malaysia and Britain: Partners in a post-Brexit world.Retrived from

https://www.gov.uk/government/speeches/malaysia-and-britain-partners-in-a-post-

brexit-world