Akshay Dixit K06009

Brexit – An Impact Analysis

Bibhu Prasad Panda K06029
Group 13
Nandan K06059
Prateek Sabharwal K06067
 On 23rd June 2016,
the UK voted A Brief Context
to leave the
European Union.
• Britain, on the 29th of March 2017 officially initiated its break up with the entire
Multinationals with
a UK holding company
European Union. Brexit has been labelled as “Once in a lifetime” event by the
structure or operations experts over the world as United Kingdom decided to cut lose EU. This meant
in the UK the subsequent exit of various Indian firms and businesses well established in
should therefore Britain and relocation of these offices to different regions.
prepare for
potential changes
in the • With the exit of Britain from the EU referendum, researchers have witnessed a
legal and significant drop of 0.3% in the current Indian GDP growth from the earlier
regulatory environment 7.6%. Though the Indian Government is making enough efforts to suppress the
post-Brexit, loss due to this downfall, the drop hasn’t successfully damaged the growth of
which may Indian economy.
significantly impact
on their businesses.
About EU
• The European Union is a unified trade and monetary body of 28 member countries.
• It eliminates all border controls between members.
• It allows the free flow of goods and people, except for random spot checks for crime and
drugs.
• Three bodies govern the EU
• The EU Council
• The EU Parliament
• The EU Commission
 Members in EU

• Austria • Portugal • Italy • Denmark

• Belgium • Romania • Latvia • Estonia
• Slovakia • Lithuania • Finland
• Bulgaria
• Slovenia • Luxembourg • France
• Croatia • Spain • Malta • Germany
• Cyprus • Sweden and • Netherlands • Greece
• Czech Republic • United Kingdom • Poland • Hungary
• Ireland

Note:
The Number of countries will drop to 27 after Brexit causes the United Kingdom to leave the EU .
BREXIT – Pros for UK
 Brexit would shift the emphasis of trade for Britain.
 Separating themselves from the European Union gives the country an
opportunity to negotiate its own trade partnerships.
 Brexit establishes the sovereignty of Britain.
 Britain were forced to give up some control over their domestic affairs to
maintain its positive membership status.
 Brexit offers the possibility of new jobs.
 When the immigration will drop, the chances for more jobs in UK will increase
for local people.
 Brexit could improve border security.
 The country could close their open borders to begin checking visitors and
controlling the flow of people movement.
Contd.
• Brexit may help the Britain in immediate cost savings.
• Britain paid £13.1 billion in membership dues to the multinational structure in 2016, while receiving
just £4.5 billion in return through spending. It will help to save and reduce cost.
• Brexit could help to stop issues with bureaucracy.
Cons of Brexit to UK
• No Deal Brexit!
What does it mean?
A No-Deal Brexit means UK would no longer be a part of EU and therefore no
trade agreement with European Countries.
Britain’s Tariff Free trade agreement with EU states will no longer be valid.
Hence Exports to EU countries would become costly and thus increasing
price of the goods and making it uncompetitive in the market.
Also higher imports to UK would lead to inflation and lowers the living
standards in Britain, It is to be noted that one-third of the food for UK comes
from EU States
Contd.
UK is already vulnerable due to global warming and heat waves it faces annually, which has
made agriculture impossible in UK. With the already deteriorated situation, if the goods have
to go through customs due to trade barriers it would delay the process and may also lead
food shortages.
Northern Ireland which is part of UK shares borders with Ireland which will stay part of EU,
This would create custom border between two countries. This would bear effects on 35000
commuters to go through customs who travel for their work. Also the disagreements
between Northern Ireland and Ireland which dates back to 30 years may resurface, which
had been pulled down due to EU.
Contd.
UK will have to pay $51 Billion which is outstanding to EU and will also have to guarantee
rights to EU citizens in UK.

• For the common men

EU Citizens have investments and family in UK and other countries. This would mean they
can not reach out to their families without permissions. It would be difficukt determine the
status of their investments in UK. Also many of the EU citizens get their pensions from UK,
how will these transactions be affected or regulated is a high concern. Also investments of
UK citizens in the rest of EU, how it has to be treated and what has to be done is not
determined to date.
Data: UK Department for Exiting the European Union
Consequences
of the
Brexit scenario
for the UK

Source: KPMG, 2017

PROs of Brexit on EU
• Europe feel a new cohesiveness
The U.K. often voted against many EU policies that other members supported. International Monetary
Fund Director Christine Lagarde quoted, “The years are over when Europe cannot follow a course
because the British will object.” She added, “Now the British are going, Europe can find a new elan.”
• It makes possible further integration that would have been much harder if UK remained. An early
example is the recently signed joint defences pact that was opposed previously by UK. Though now it
seems UK will cooperate in certain areas.
• The referendum result seems to have increased support for EU in member countries. There had been
some political defeats of separatist parties recently, most notably in Netherlands and France, but across
all member states support for EU rose after the referendum This, along with the much better economic
growth most member countries are experiencing, give EU some breathing space to reform. And also
expand further.
• If UK fails to get a sufficiently good trade agreement with EU and its economy suffers as a consequence,
then Brexit can serve as a salutary example, weakening support for separatist parties elsewhere. The
UK economy doesn’t even have to contract for this argument to be made. Just ten years of under-
performance (from 2016) against some sort of EU-average will probably suffice
Negative Aspects of Brexit on Europe

The full canopy of

checks and tariffs will Higher barriers to
be imposed on EU’s trade, capital flows,
exports to the UK, and and labour mobility will
cross-border trade in affect output and jobs
manufacturing and not only in the UK but
services will face new also in the remaining
mutually enforced 27 EU member states.
restrictions.
Why the 27 EU member states will suffer
• Bonds between the EU and the UK run deep: The
UK is among the EU 27's largest trading
partners, accounting for about 13 percent of its
trade in goods and services.
• Financial Linkages (around 52% of EU-27 - 2016
GDP) and Migration flows (Especially Ireland),
will be severely hampered, resulting in loss of
jobs and long term output for EU-27
• Standard FTA between EU and UK will mean EU-
27 real output will be lower by 0.8 %, and
employment by 0.3 %.

Source: International Monetary Fund

• Hit to Ireland’s income the largest in the EU-27
(about 2.5 % compared to the no-Brexit scenario),
followed by the Netherlands, Denmark, Belgium, and
Czech Republic.

• French President Emmanuel Macron warned on

Friday that the EU27 must present a "united front"
or risk an outcome "unfavourable to the European
Union and thus to each one of us.”

Source: Politico.eu
 Industry Wise Analysis – 3 Major sectors
(source: politico.eu)

• U.K is the third-largest trade partner

of The German City of Bremmen, fifth
Trade and largest for Berlin. UK is the 3rd largest
Commerce: foreign investor for Sweden and
Spain’s second largest export market.
All those countries will face the pinch.
Contd….

• The prospect of the U.K. leaving the EU's

Common Fisheries Policy (CFP) and
potentially blocking access to the waters
Fishing: in its Exclusive Economic Zone — the
area around its shores where it will
regain control of fishing rights .
Contd….

• A range of concerns across Europe

linked to changes in the movement of
Labour and people as a result of Brexit, including
Migration: managing migration, coping with reduced
tourism and dealing with citizens
returning home from the U.K.
Impact on EU’s budget

After removing about €7 After Brexit, Germany ( EU’s

The UK's contribution to
the EU budget in 2016, was
€19.4 billion.
billion that the UK receives
in EU subsidies, the loss to
the EU budget comes to
about 5% of the total.
largest net contributor)
seems likely to be asked to
provide the largest share of
the cash, its share estimated
at about €2.5 billion.

Impact: European Commission has looked at reductions in regional spending of up to 30%, which has concerned some of the poorer
member states which rely heavily on the regional funds.
(Source: https://www.politico.eu/article/eu-budget-barnier-davis-brexits-minimal-impact/)
Ideological Shift
• As the EU's third most populous state, with over 12% of the Union's population, the UK is
an influential player in the European Parliament and the Council of the European Union.
• Germany will dominate the EU but several countries are wary of German dominance.
(Source: https://www.ucl.ac.uk/constitution-unit/research/europe/briefing-papers/Briefing-paper-2)
Impact on Eurozone

Calls for Multi-Currency Union will undermine adoption

of Euro in other countries.

With the UK leaving the EU in 2019, the eurozone will

represent 70 % of EU countries and 85 % of the bloc's
GDP, changing the economic and political balance within
the EU.
(Source: https://www.ft.com/content/4ada3ce0-9aaa-11e5-be4f-0abd1978acaa)
Impact on India
• India, out of the total of 195 countries, is highly valued in terms of the
global market, IT sector, exports, trade etc and appreciated as the
fastest growing economy in the world. Unexpected events such as Brexit, IS
which hold such massive strength that it has globally shaken the INDIA READY
economy of the entire world with its long-term impacts.
TO HANDLE
• The present impact of Britain-Exit on India has been both a mixture of THE BREXIT?
positives and the negatives. With the profits been higher, this adds on as
a relief to the Indian economy and easy market access. Yet, the country
hopes for profitable negotiations in future working in favour of global
economic growth.
IS INDIA READY TO HANDLE THE BREXIT?
• The finance ministry said that the country has sufficient foreign exchange
reserves to handle any impact.
• RBI Governor Raghuram Rajan said the central bank will infuse whatever
liquidity is needed into the Indian market to keep it “well behaved”.
• SEBI and stock exchanges have beefed up their surveillance mechanism to
deal with any excessive volatility.
• If exports to the UK are costly and imports are cheaper, India can think of
utilizing the import-advantage by reversing the present trade scenario.
• Once the dust settles, India may be seen to be a net gainer and inflows would
continue to gravitate towards the Indian shores.