BRE

Group
D
P• Abd-Elrhma
i o n e e n Fa thy
• Amr He mdan
r• sAya Sa a d
• Ibra he m De souky
• Moha me d Elha wa ry Supe rvise d by : DR. La me s El-
• She re e n Za ye d Ara by
 Agen
•dHistory
a of the Europe a n Union
• History of the Europe a n Mone ta ry
Union
• History of Bre xit
• Impac t of Bre xit on GDP
• Impac t of Bre xit on Infla tion
• Impac t of Bre xit on La bour
1. History
of the
European
Union
• Effects of World Wars on the (EU)
• The creation of Paris Treaty (1984 -1957)
• Treaty of Rome and creation of (EEC) (1958 – 1972)
• First enlargement and European Co-operation (1973 – 1993)
• The formal creation of (EU) through Treaties of Maastricht,
Amsterdam and Nice (1993 – 2004)
• The Libson Treaty and reformation of (EU) since 2004
 2. History of the
European Monetary Union
Beginning from the Second World War, the Bretton
Woods System was used to try and maintain stability
among major currencies. However, it was dropped in
1971. European countries then launched the European
Monetary System in 1979, and leaders sought to achieve
monetary stability through a stable exchange rate.

The EMS launched the European Currency Unit and the

European Exchange Rate Mechanism to achieve the
overarching goal of monetary stability and work towards
the idea of a single market in Europe. It stayed in place
until 1999 and was then succeeded by the European
Monetary Union (EMU) and the Euro.
 2. History of the
European Monetary Union
How Did It Work?

The European Monetary System mainly relied upon the

ECU and the existing exchange rate mechanism.
Exchange rates were only allowed to deviate within a
certain range from the fixed central point, which was
determined by the ECU.

In the EMS, exchange rate fluctuations of member

countries’ currencies were limited to 2.25% from the
fixed central point, which was determined by the
European Economic Community.
 2. History of the
European Monetary Union
Goals of the European Monetary System

• Encouraging trade within Europe

• Exchange rate stability among trading members
• Controlled inflation within Europe
• The 1992 Crisis
 2. History of the
European Monetary Union
Benefits of the European Monetary System

Ensuring currency stability

Working towards a single market
Unity in Europe

Drawbacks of the European Monetary System

Fixed exchange rates

Common monetary policy
 2. History of the
European Monetary Union
The End of the European Monetary System

Following events in 1988, the EMS was set to undergo a three-stage reform
that eased the transition to a common European monetary union. The first
stage introduced free capital movements across Europe and was a part of
the 1992 crisis. It continued functioning under the Maastricht Treaty, which
was signed in 1992 and laid the foundation for the European Union.

The second and third stages came in 1998 and 1999 respectively, after the
introduction of the Euro. The EMS and its exchange rate system were
replaced by the adoption of the Euro and the formation of the European
Central Bank, which has authority over the EU’s monetary policy.
 3. History of
Brexit refers to the withdrawal of the United Kingdom
(UK) from the European Union (EU). The term "Brexit" is
Brexit
a combination of "British" and "exit.

1. UK's EU Membership: The UK joined the European

Economic Community (EEC), in 1973. Over the years, the
EU's influence expanded, covering various aspects of
governance, trade, and regulations.

2. Calls for Referendum: Growing concerns about

sovereignty, immigration, and EU regulations led to calls
for a referendum on EU membership. In 2013, then-Prime
Minister David Cameron promised to hold a referendum if
his Conservative Party won the 2015 general election.
3. Referendum and Brexit Vote: On June 23, 2016, the UK
3. History of
held a referendum on EU membership. The majority of
voters (51.9%) chose to leave the EU, while 48.1% voted
Brexit
to remain. This outcome initiated the process of Brexit.

4. Triggering Article 50: In March 2017, the UK

government used Article 50 of the Treaty on European
Union, officially triggering the withdrawal process. This
set a two-year deadline for negotiations between the UK
and the EU.

5. Negotiations and Deadlines: Negotiations between the

UK “Thesea May” and the EU took place over several
years, focusing on key issues such as trade, immigration,
and the Irish border. Multiple deadlines were set and
extended to reach agreements.
 3. History of
6. Withdrawal Agreement and Transition Period: In Brexit
November 2018, a draft Withdrawal Agreement was
reached, outlining the terms of the UK's departure. the
agreement was approved in January 2020. This triggered a
transition period until December 31, 2020, during which
the UK remained part of the EU's single market and
customs union.

7. Post-Brexit Relationship: The transition period allowed

the UK and the EU to negotiate their future relationship,
including trade agreements and other areas of cooperation.
The UK officially left the EU and the transition period
ended on December 31, 2020.
4. Impact of
Brexit on GDP
The impact of Brexit on the Gross Domestic Product (GDP) of the United Kingdom
has been a subject of significant debate and analysis. The decision to leave the
European Union has potential implications for the UK's GDP growth, trade
relationships, investment, and overall economic performance. The actual impact,
however, will depend on the terms of the UK's future relationship with the EU, as
well as its ability to negotiate trade deals with other countries.

One potential impact of Brexit on GDP is through trade. As a member of the EU, the
UK has benefited from access to the single market, which has facilitated trade with
other EU member states. Trade with the EU represents a significant portion of the
UK's GDP, so any disruption to this trade relationship could have a negative impact
on economic output. The future trading relationship between the UK and the EU will
be crucial in determining the extent of this impact. Higher trade barriers, tariffs, and
non-tariff barriers could result in reduced trade flows and slower GDP growth.
4. Impact of
Brexit on GDP
Furthermore, Brexit may affect foreign direct investment (FDI) in the UK. The
uncertainty surrounding Brexit has already led to some companies postponing
investment decisions. If the UK's access to the EU market is restricted, some
companies may relocate operations to other EU countries, leading to reduced FDI in
the UK. This could hurt GDP growth, as FDI contributes to capital formation and
productivity improvements.

Another potential impact is on the labor market. The UK has historically relied on
immigrants from the EU to fill labor shortages in various sectors, including
agriculture, healthcare, and hospitality. Restrictions on the movement of labor as a
result of Brexit could lead to labor shortages and increased labor costs, which could
adversely affect the productivity and output of these sectors and the wider economy.
4. Impact of
Brexit on GDP
However, Brexit could also present opportunities for the UK. For example, the ability
to negotiate its trade deals with other countries outside the EU could potentially open
up new markets for British goods and services, leading to increased export
opportunities and economic growth. Additionally, the UK could have more control
over its regulatory framework, potentially reducing regulatory burdens on businesses
and fostering innovation and competition.

The long-term impact of Brexit on the UK's GDP will also depend on domestic policy
responses and reforms. For example, the UK could implement policies to boost
domestic investment, enhance productivity, and support key sectors of the economy.
Investments in infrastructure, education, and innovation could potentially offset some
of the negative impacts of Brexit on GDP growth.
4. Impact of
Brexit on GDP
It's important to note that the full impact of Brexit on the UK's GDP is uncertain and
subject to various factors, including the final terms of the UK's withdrawal from the
EU, the nature of its future trade relationships, and domestic policy responses.
Furthermore, the COVID-19 pandemic has added another layer of complexity to the
economic outlook, with implications for trade, investment, and overall economic
activity.

In conclusion, the impact of Brexit on the UK's GDP will depend on a complex
interplay of factors, including trade relationships, investment, labor market dynamics,
and domestic policy responses. The ultimate impact will become clearer as the UK's
future relationship with the EU and its broader economic strategy unfold.
Policymakers, businesses, and individuals need to monitor developments closely and
adapt their strategies accordingly.
5. Impact of Brexit on Inflation
 B r e x i t Ti m e l i n e

UK UK apply
Brexit referendum UK left the EU EU applied full Introduction of
(2016) (2020) customs (2021) full customs full customs
(2022) (2024)
 Custom
Declaration
For import: to protect the country against harmful or
dangerous goods to the economy and environment.

For Export: To executive orders restricting certain goods

to be exported and to take surveillance measures.
C u s t o m Ta r i f f s
 EU customs union
The customs authorities of all EU countries work
together as if they were one. They apply the
same tariffs to goods imported into their territory
from the rest of the world, and apply no tariffs
internally.
 Supply chain disruptions

Custom Declaration = Increasing the time.

Custom Tariffs = Increasing expenses.

 F o o d I N F L AT I O N
- Prices of food and non-
alcoholic beverages rose
to 19.2% in March 2023,
which was the highest
annual rate seen for over
45 years.
- Before Brexit:
30% of food in UK comes
from EU.
50% of vegetables
comes from EU.
Majority of fruits comes
from EU.
G A S I N F L AT I O N
 UK Inflation Rate
( C R E E P I N G \ S T R AT O I N FA LT I O N )
 Inflation Reasons (Cost Push )

Government Claim:
• Covid pandemic.
• Russia’s invasion of Ukraine.
• Shortage in the number of people available for
work in the UK.

Based on the above slides (Our opinion):

Brexit amplified the impact of the simultaneous
common shocks.
 Monetary Policy to reduce Inflation
(contractionary)

The Bank of England increased the

interest rate for 14 times in a row.
The Bank of England has a target to
keep inflation at 2%
 Fiscal Policy to reduce Inflation
(contractionary)

• From April (2023) , businesses

with profit above £250,000 will
pay 25% corporation tax rate
instead of 19%.
The Impact of Brexit on
the UK and EU labour
Market

 Brexit has significantly impacted the UK and

EU labour markets, presenting both challenges
and opportunities.
 Continued monitoring and adaptation are crucial
to navigating these changes and ensuring a
strong future for both economies.
Challenges and Reduced EU Worker Migration to the UK
opportunities Net migration from the EU To UK fell from 249,000 in 2016 to 31,000 in 2022 The UK's immigration landscape
has significantly changed since 2021, with a significant increase in Non-EU immigration 102,000 increased
in the UK and
Most of the immigration is now non-EU nationals, by 82% of total immigration.
EU Labor
The top five non-EU nationalities for immigration flows into the UK were Indian, Nigerian, Chinese, Pakistani, and
Market Ukrainian.
 I m m i g r a t i o n To
UK

• Net migration from the EU To UK fell from 249,000 in 2016 to

31,000 in 2022 The UK's immigration landscape has
significantly changed since 2021, with a significant increase in
Non-EU immigration 102,000 increased
• Most of the immigration is now non-EU nationals, by 82% of
total immigration
• The top five non-EU nationalities for immigration flows into
the UK were Indian, Nigerian, Chinese, Pakistani, and
Ukrainian.
• Since January 2021, the UK's points-based immigration system
prioritizes skilled workers from around the world
 Emigration From UK

• Emigrating from the UK long-term reached

508,000, an increase of 37,000 from the previous
year.
• Non-EU nationals accounted for 39% of this total
• EU nationals (42%)
• British nationals (18%).
• Non-EU emigration increased by 72,000, mainly
driven by those on initial study visas.
• net international migration in the UK reached its
highest level in two years, with 672,000 net
migrants
 Recruiter’s Biggest Concerns

Labour and skills shortages Labour shortages 88%

Skill shortages 65%

Introduction Other major concerns for recruiters include:

Retaining their workforce 45%

Recruiting from abroad/new immigration system 28%

Ongoing uncertainty around pandemic and
27%
reintroduction of public health restrictions

Regulatory changes relating to Brexit 22%

Factors affecting recruiters ability to place suitable candidates

• The number of vacancies in September to November 2023 was 949,000, a Skills shortages 65%

decrease of 45,000, down by 4.5% since June to August 2023 with vacancies Current immigration system 56%

Inability to offer competitive salaries 53%

falling in 16 of the 18 industry sectors.
Workers’ unwillingness to change jobs 49% Right to

• The industry sectors showing the largest annual decreases in the number of work changes for EU workers 47%

Filling the roles

vacancies were human health and social work, and professional, scientific Despite the severity of the labour and skills shortages,

and technical activities, which both fell by 34,000 from the equivalent recruiters have been working around the clock,
placing people into work. Many of the respondents
say they have a significantly higher number of roles

period last year. to fill than before the pandemic – three in five
recruiters (58%) have at least 30% more vacancies
now.
Almost every respondent to the REC survey (97%) said
• The number of workforce jobs in September 2023 was 36.8 million, an
50% 47% 97%
that it was taking longer than usual to fill those
vacancies, exacerbating the problem:

increase of 210,000 from June 2023.

• Hospitality: 1.9 million unfilled vacancies in 2023
• Healthcare: 110,000 unfilled vacancies in 2023 3 in 5 Why?
It is taking longer than usual to fill those
vacancies
It is harder to
find and
It takes a lot longer than
usual to find suitable
place candidates (more
suitable candidates than a month)
(up to one month)

• Increased Competition for Skilled Workers in the EU have at least 30% more vacancies

Recruiters' response

Recruiters have adapted their operations Simplified their recruitment 48%

Our findings clearly highlight the severity of the problem. Nine in ten recruiters (88%) say that labour shortages are their to respond to the fluid demand of process
biggest concern for the remainder of 2021, while skill shortages are a major concern for two in three (65%). the pandemic. Here’s what some our Increased starting salaries 48%
members have done to respond to
a changing labour market: Introduced flexible working 34%
T h e a v e r a g e Va c a n c i e s f o r U K

• The number of vacancies fell by 45,000 to 949,000 seasonally adjusted, 2004 to

2023
• The total number of vacancies fell by 4.5% from the previous quarter, with arts,
entertainment and recreation contracting the most, falling by 19.9%.
• The industries that decreased the most were human health and social work, and
professional, scientific and technical activities, where the number of vacancies fell
in both by 34,000..
• The ratio of vacancies per 100 employee jobs was 3.0
Unemployment and
Employment For UK

Unemployment
• The unemployment rate has increased in the
latest quarter, with the largest quarterly increase
since September to November 2020.
• In the latest quarter, the increase in the
unemployment and economic inactivity rates.
• The increase in the unemployment and
economic inactivity rates, and the decrease in
the employment rate, in the latest quarter were
driven by men
Employme
nt • The number of full-time employees
decreased during the latest quarter but is still
above pre-pandemic levels.
• Part-time employees had generally been
decreasing since the beginning of 2022.
• The number of people in employment with
second jobs fell in the early stages of the
pandemic.
• In the latest quarter however, the number fell
to 1.2 million (3.7% of people in
employment).
Unemployment and Employment For EU

• Manufacturing sector. The picture is broadly similar for the services sector, with most PMI
indicators pointing to a further slowdown in the fourth quarter. (left-hand scale: quarter-on-quarter percentage changes, diffusion index; right-hand scale: percentages of the labour force)

Employment
• Employment growth continued to be robust in the first half of the year, at an average quarterly rate PMI assessment of employment
Unemployment rate (right-hand scale)
of 0.3%. 1.6 8.4

• The unemployment rate decreased to 6.4% in August 1.2 8.0

• The large number of people employed in the first half of 2023 masked ongoing suppressed working 0.8 7.6

hours as a result of continued high levels of sick leave and some labour hoarding. In the second
0.4 7.2
half of the year, weaker economic activity is likely to translate into weaker labour market
0.0 6.8
momentum.
• The unemployment expectations of professional forecasters edged upwards, pointing to the -0.4 6.4

likelihood of an increase in the unemployment rate over the coming year. -0.8
Q1 Q2 Q1 Q2 Q1 Q2
6.0
Q3 Q3 Q3
Q4 Q4 Q4
2021 2022 2023
Productivity and Growth Average wage growth: 5.1% in October 2023
Wa g e G r o w t h

Average weekly earnings (AWE) were estimated at £673 for total pay and £621 for regular pay in September 2023. the average weekly earnings have steadily
increased, except for the early months of the coronavirus (COVID-19) pandemic.
M o n t h l y Wa g e s , S a l a r i e s a n d C P I H

• The highest regular pay annual growth rate since comparable

• The higher CPIH inflation over the past 18 months, real pay
records began in 2001. For the private sector this was 7.8%.
has fallen on the year as inflation has started to reduce.
• The largest annual regular growth rates seen outside of the
• The real growth return to increasing on the year.
coronavirus pandemic period, when the growth rate peaked at
• The real total and regular pay growth rates and monthly
8.4% in April to June 2021.
inflation, For July to September 2023, CPIH was an average
• Annual average total pay growth for the private sector was
of 6.3%.
7.7% in July to September 2023. For the public sector, this was
8.6%.
Pay growth

In August to October 2023, the finance and business services sector saw the largest
annual regular pay growth rate at 8.3%. The manufacturing sector followed at 7.4%
 Labour Productivity
Output per hour worked was 0.3% higher than a year ago, and
2.8% higher than in 2019
Gross value added, hours worked, output per hour worked, UK, index 1997 Q1
= 100, Quarter 1 (Jan to Mar) 1997 to Quarter 2 (Apr to June) 2023

Labour productivity by industry

• Administrative service and construction industries made the biggest upwards
industry contributions to annual productivity growth. By contrast, finance and
insurance made the biggest negative contribution to productivity growth.
• The hotel and catering industry did not make any substantive contribution to
productivity growth over the same period.
• Whole-economy growth in productivity is affected by reallocation of economic
activity between industries (the between-industry effect).
• The between-industry reallocation made a positive contribution to productivity
growth over the past year, showing that on average, economic activity tended to
shift from industries with lower productivity to industries with higher productivity.

Administrative services made the biggest upwards

contribution over the last year
Contribution to growth of output per hour worked, percentage points,
relative to Quarter 2 (Apr to June) 2022

Administrative services saw the biggest growth in output per hour

worked over the last year
Decomposition of growth of output per hour worked, hours worked and gross value
added, Quarter 2 (Apr to June) 2023 versus the same quarter a year ago (Quarter 2
2022), percentage change, UK
 Labour costs and labour
income
• Total employment costs (TEC) grew 1.7% in quarter 2 (Apr to
June) 2023 when compared with quarter 1 (Jan to Mar) 2023.
• The growth in TEC was stronger than the 0.1% growth in real
gross value added for the same period resulting in nominal
unit labour costs (ULC) growing 1.6% in quarter 2 2023.
When compared to quarter 2 2022, ULCs increased by 5.8%
• Unit labour costs, total employment cost, real gross value
added, UK, index 2019 = 100, Quarter 1 (Jan to Mar) 2019 to
Quarter 2 (Apr to June) 2023
Euro area labour market
(percentage of labour force (left-hand scale), annual percentage changes (right-hand scale)) increase slightly from its historical low of 6.4% to stand at 6.7%
Unemployment rate (left-hand scale) in 2025. This entails an upward revision of 0.3 percentage points
Employment (right-hand scale)
for 2024 and 0.4 percentage points for 2025 in the light of the
Labour productivity (right-hand scale)
13 revisions to the growth outlook. Average hours worked per
5
12
person employed are projected to grow moderately, implying a
4
11
recovery to around their pre-pandemic levels by the end of the
3
projection horizon. In terms of both number of employees and
10
2
hours worked, the projections therefore suggest a gradual
9 1
reduction of labour hoarding and thus a recovery in labour
8 0
productivity.
-1
7

-2
6

-3
5

-4
4
-5
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
thank