Too often has Brexit been classed as an issue that will devastate the British economy. The issue is that Brexit does not necessarily mean economic depression, as promoted by campaigns such as Project Fear. This essay will instead look at the benefits of Brexit on an economic level, from its help in letting the UK write their own laws (especially with regards to excessive regulation) to how Brexit lets the UK negotiate and decide their own trade deals.
The most commonly brought up issue with Brexit is the asymmetry in power between Europe and the UK. While it is true that the EU forms a large part of the UK’s economy, the UK similarly helps hugely with the economy in EU member states. In fact, the UK had a £66 billion trade deficit with the EU, made up of their £28 billion trade surplus in services and their £94 billion trade deficit in goods. This showcases the EU’s partial reliance in the UK as a trading partner, seen in the £341 billions of exports from the EU to the UK, which would make the UK the EU’s 2nd largest trading partner in terms of trading output. This would equate to almost 16% of the EU’s total exports, making the UK a vital trading partner for the EU. This clearly suggests that the EU has a large reliance on the UK in terms of trade, making a trade deal beneficial to both parties.
Furthermore, even if the UK is forced to trade with tariffs, the economic impact would be surprisingly small. If the UK was traded with the EU on Most Favoured nations tariffs terms, while the UK would have to pay £6 billion annually on exports to the EU, the EU would have to pay roughly £14 billion on its exports to the UK. This showcases how there would actually be worse harms to the EU, suggesting that a deal would be vastly preferable to no deal. Although the bulk of the tariffs would hit certain industries, the government through broader economic policy, as WTO rules prohibit direct exporting subsidies, support the most affected industries such as agriculture. Furthermore, they could put money into a research and development expenditure credit to help all businesses, but which had an enhanced allowance for agriculture, permissible under WTO rules. Then there could also be regional policy to assign funds to areas that have less than 85% of the national average per capita income or where unemployment is 110% of the national average. Of the funds here, 68% of them would go to the industries most affected by the tariffs. There could also be specific subsidies which are allowed under WTO rules, such as a maximum possible €5 billion of subsidies put into agriculture, which would more than counteract the projected €1.7 billion costs from tariffs. This would allow for the impacts of the tariffs on the vulnerable sectors of the UK’s economy to be offset and could be fully funded from the tariffs that the EU would have to pay the UK, with more funds left over.
But, aside from the impacts on trade, there is reason to expect that the UK would be able to make better implement regulation. Although the slogan for the UK to ‘take back control’ is overused, it still holds some truth. In fact, the UK would be able to be able to apply regulation that they felt was reasonable on currently overregulated industries in the EU. According to research from Open Europe in 2013, EU regulation costs the UK’s economy £27.4 billion annually. In particular, this would allow the UK to repeal laws that require places like care homes to spend 16 days per year on inspections and a further 25 days on dealing with information requests. As such, the removal of the EU’s red tape would actually have many significant advantages that come out of it, including a large economic boost, which is essentially what the success of Brexit will be judged on.
The ability for the UK to make their own trade deals with other nations also gives reason to expect the economy to be able to be successful come Brexit. This means that the UK could negotiate its own free trade deals and would no longer have to be reliant on those of the EU Blocs that prevents the UK from making their own trade deals. At present, the global economy excluding the EU is $58 trillion. The EU’s economy is $18 trillion and growing at a far slower growth rate as per the IMF, with outside the EU growing at 4% compared to 2% in the EU. This means that there is better scope for the UK to have trade on a global rather than at a regional level, meaning that it makes far more sense to trade globally when presented the choice. This graph shows how in the long-run globalisation is a far better plan for the future of the UK’s economy, as the benefits of global trade will soon outnumber those of regional trade, especially as the UK’s economy has three main reasons that makes it conducive to globalisation: a thriving financial sector that is international in its nature, speaks English that is globally the language of business and has English Law that largely overlaps with most developed nations that the UK would trade with. In fact, even at the moment, the UK’s exports to the rest of the world is quickly overtaking their exports to the EU. This therefore means that in the long run Brexit would actually help the UK’s economy, especially as the EU is held back due to its over-regulated markets and how it is willing to let the economy suffer to form and ever closer political union.
Ultimately, Brexit will bring many economic advantages. Even if there is a no-deal Brexit which is very unlikely, Brexit will still not only garner many short-term benefits, from tariffs to removing unnecessary regulation, but also will open up a far larger market in the future to trade with. Even in the case of a no deal, there is no problem.
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