G12ENG ADV. B
20 December 2017
To what extent will a Hard Brexit influence the competitiveness of British export in the global market?
The purpose of this research is to investigate whether the competitiveness of British export will be reduced due to the existence of more trade barriers post-Brexit, and how will those barriers reduce the competitiveness in the world market.
Brexit is the abbreviation of “Britain leaving the European Union (EU)”, and Hard Brexit refers to “a withdrawal in which Britain would give up participation in the EU single market and its own immigration system, introducing stricter controls on immigration from the EU and elsewhere; it would also require Britain to carry out trade with Europe and other nations under WTO rules”, according to Theresa May, the Prime Minister of the UK.
The methodology of this research will be mostly literature review that I will peruse news and reports with different perspectives and make analysis. British export data from Data World Bank will also be analysed.
Background of the Research
During the EU Referendum in 23rd June, 2016, “Leave” won by 51.9% to 48.1%. Therefore, the British government had to obey the popular and the UK is leaving the EU. However, the UK is still making negotiation with the EU by now. Theresa May announced to achieve Brexit by March 2019, whatever a post-Brexit agreement between the UK and the EU has been achieved. If they cannot reach an agreement, Hard Brexit will take place and it may have significant influence on British international trade, especially the competitiveness of British export in the global market. Next, I am going to discuss different perspectives about this.
Great Loss in the British Financial Industry (Services)
A Hard Brexit will not offer the UK access to the EU financial market that they have now. It would be hard for London-based banks to get “passports” for their services in the EU, which means London’s status as the financial centre of Europe might be shaken.
Britain’s financial industry could lose up to 38 billion pounds in revenue with restricted access to the European Union’s single market, according to a report commissioned by an industry group. At the same time, 75,000 jobs may disappear and the government may lose up to 10 billion pounds in tax revenue, according to the report by Oliver Wyman.
Loss in Access to More Productive Labour
A Hard Brexit will not offer the automatic right for EU citizens to work in the UK, which means there will be more job opportunities for British people and less pressure on the local infrastructure.
However, the immigrants from other EU countries to UK took more than 50% of the total immigration population to UK each year. According to Dustmann and Frattini’s research in 2013, the average age of the immigrants from other EU countries was around 30s and they were shown to have much better academic background than the local British people, and the amount of taxes they paid each year was much higher than the value of welfare they gained.
Once the UK leaves the EU, the UK companies can no longer obtain that large amount of cheaper and skillful labour from other EU countries, this will lead to higher labour cost and lower productivity, which will reduce the competitiveness of British exports.