The United Kingdom Leaving the European Union | Free Essay Example

The United Kingdom Leaving the European Union

Words: 2927
Topic: Politics & Government


European Union, as defined by MacShane (2015, p. 56), refers to “a politic–economic union, often called the EU, that brings together member countries of European Economic Community under the Maastrict Treaty, and envisions the eventual establishment of common economic, foreign, security, and justice policies.” Since the formation of this politico-economic union in 1992, it has become a major block that has significant impact on the economic and political activities among the member countries. The idea during its formation was to have a common market for all the member states where goods would move freely without tariffs or any other bottlenecks. The United Kingdom, being one of the regional economic powerhouses, saw this as a perfect opportunity to make its locally-made products available in this huge market.

The fact that the block also had an agreement where member states committed to act as a unit in cases of attack from aggressing countries such as Soviet Union was another reason that attracted United Kingdom into this union. The trade agreement had significant economic and political impact on the United Kingdom. It opened up the European market for United Kingdom’s products. Given that the block negotiated with the outside world on behalf of the member states, United Kingdom benefited a lot because of the politico-economic power that the union had when it came to negotiating major global treaties. Following the decision of the United Kingdom to leave the European Union, the other partners have urged the leadership of this country to speed up the process of exiting the Union (Brandon, 2014). It was seen as a sign of solidarity of these partners even after the exit of the United Kingdom. It is expected that this exit will have significant impact on the country’s economy. In this paper, the researcher seeks to evaluate the economic effects of United Kingdom’s leaving the European Union.

Objective of the project

When conducting a research project, it is important to come up with clear objectives that would help in the process of gathering resources for the study. The researcher came up with the following research objectives for this project.

  1. To identify and describe impacts of the UK leaving the EU to its economy, political positions and international relations.
  2. To describe whether the decision of the UK leaving the UK was a good decision as far as economic concepts are concerned.
  3. To describe the short term and long term impacts of the UK leaving the EU on its GDP.
  4. To gives some of the benefits and losses the UK economy might experience after leaving the EU.
  5. To give some reasons for and against the UK’s decision of leaving the UK and give your personal stand basing on the economic impacts discussed above.

This research project will be considered a success if the above objectives are met. The researcher will rely on secondary sources to meet these objectives. A review of the existing literatures will be conducted to collect the needed information.

Issues Addressed

This research will address a number of issues based on the above objectives. Outlining these issues at this stage will offer a clear direction for the research project. The following are the main issues that will be addressed in this project.

  1. Major short term and long effects of the UK leaving the EU.
  2. Discuss whether the GDP of the UK would be impacted positively by the decision to leave the EU.
  3. Analyze the specific reasons that led to the UK making the decision to leave the EU and if this decision would help to solve the challenges such as unstable currency value.
  4. Alternative steps that the UK should have taken to solve its economic challenges other than leaving the EU.

Literature Review

According to Hannan (2016), the decision of United Kingdom to leave European Union was not a big surprise because it had remained a major issue of public concern for the last one decade. While a section of the Britons felt that the country was better off being a non-member of the union, others felt that the union was very critical for economic development of the country. According to Minford, Mahambare, and Nowell (2005), European Union was an important economic block to the United Kingdom and the decision to leave this block is expected to have significant impact on this country. According to Stonehem (2016), as soon as the result of Brexit vote was announced, the value of Starling Pound dropped to its lowest level in about 30 years. Multinational organizations which for a long time have considered the United Kingdom as a get way to the European Union’s market had to rethink their strategy as the country started a new journey that would redefine its economic and political relationship with other European Union member states.

A section of the society felt that the decision would have serious economic impact on the country as the European Union may set new rules that might be harmful to United Kingdom’s ability to trade with other European Union member states. However, others felt that staying in the European Union was exerting unnecessary burden on the United Kingdom’s economy and that leaving it was the most appropriate way to address the problem. The long-term effect of this decision is yet to be felt following the resignation of then Prime Minister David Cameron and his replacement by Theresa May. Some firms are already considering relocating to other cities in Germany and France which are still members of the European Union (Stonehem, 2016). Determining the long-term effects is critical because it will help the country to plan on how to deal with them.

Major short term and long effects of the UK leaving the EU

According to Garner (2016), the need for the United Kingdom to leave European Union has remained a controversial topic in the country for a long time. However, the international community and some of the top leaders of the country did not expect that majority would vote for the exit. It was known to be a major concern, but it was expected that the majority will vote in favor of the country remaining in the union. One of the major short term effects of leaving European Union is the devaluation of starling pound. Soon after the result of the referendum was announced, the value of the local currency started dropping. Although the drop in the currency’s value has stopped, it is still not yet clear what will happen in the long term when the country fully detaches itself from the union. Some firms are also considering relocating to other countries as they try to ensure that they can still operate in the entire European Union’s market after the departure of the United Kingdom.

It is expected that there will be major effects of this decision, some of which the voters were not prepared to deal with when casting their vote. The ability of the United Kingdom citizens to travel to other countries within the European Union will come to an end. They will need a visa to visit these countries, contrary to what has been the case. It is expected that some of the multinational corporations in the country may relocate to other European countries such as Germany and France so that they can continue operating freely within this economic block. When that happens, unemployment may start being a problem (Pouryeganeh, 2015). Depending on the approach that other countries will take as they react to this departure, United Kingdom may find it challenging operating freely in this market. Some of its exports to the European Union may start earning tax. It is also likely that negotiation power of the United Kingdom at global level will significantly reduce because it will no longer have the backing of this huge socio-economic block.

Impact of leaving EU on UK’s GDP

The gross domestic product of the United Kingdom is definitely going to be affected by the decision to leave the European Union. As mentioned before, some companies may consider relocating to other countries or reducing their production capacity in the United Kingdom. The government of Japan, through its ambassador to the United Kingdom, already announced that it will support its firms headquartered in the United Kingdom to move to other countries after the Brexit vote to protect their market in the European Union. There are numerous Japanese companies headquartered within the country and they employ thousands of locals at various capacities. American firms may also consider taking the same steps as they try to protect their regional market share. JPMorgan Chase, Citigroup, Morgan Stanley, and Goldman Sachs have already announced that they are not ruling out the possibility of relocating to other countries within the European Union when the exit decision comes into force (Freund, 2016). These foreign firms play a significant role in boosting the GDP of the country. Their decision to relocate to other countries will have a serious impact on the GDP of the country. The GDP per capita will also be adversely affected because of the expected unemployment that comes after the exit of these major companies.

It is also possible that some of the local firms that have dominated the regional market such as HSBC may consider relocating their headquarters to other cities in the European countries such as Germany or France. These large British firms earn more profits from these other European countries than they do earn locally. If given opportunity to choose, these firms will prefer European Union to United Kingdom (Bootle, 2015). As the level of production within the country reduces in response to the expected changes, the country’s GDP will be expected to experience a slowed or even negative growth. European Union has negotiated numerous treaties with other major economic blocks in Africa, Asia, North and South America on behalf of its member states. These treaties allow it to export its locally made products to these markets at reduced tariffs. When it leaves this union, it will no longer be eligible to enjoy these benefits (Pouryeganeh, 2015). It will be forced to negotiate with these other economic blocks as a country, a move that may be challenging, especially if it is opposed by the European Union. These local firms will be forced to pay high taxes to export their products. Such trade barriers may significantly affect productivity of these firms, which in turn will further hurt the economy.

According to Foster (2016), one of the main disadvantages of UK leaving EU is that there might be a possible lack of politico-economic corporation between it and the European Union. EU is the main trading partner of the UK. Following the exit of the UK from the union, member state will be keen to monitor the benefits that they get as members of EU that UK will be lacking. As a way of passing a message to the other member states, EU may deny UK a number of economic benefits just to help demonstrate how beneficial it is for a country to be a member of European Union. It may impose serious taxes on UK-based firms, and as a result many firms may consider moving out of the country. The ability of UK to trade with the international community may also be compromised if EU decides to stand on its way. No single economic block or country will opt to trade with UK if the other alternative is EU. The UK will still require a lot of support from and cooperation with the EU even after the exit in order to protect its economy. It will be forced to make a number of treaties with EU to the extent that there will be no escaping some of the issues that the voters were trying to eliminate when they made the decision to leave the union.

Specific reasons that made the UK leave the EU

According to Hannan (2016), a number of reasons prompted Britons to for in favor of leaving the European Union. One of the leading reasons that were used to convince the electorates to vote yes was the fact that United Kingdom was spending a lot of money on European Union, funds that may help address local concerns such as housing problems. They felt that after leaving the union, the huge contributions that the country has been making will be used to address housing problem. It is yet to be seen if this decision will solve the housing problem because it is expected that revenues that the government gets in form of tax shall reduce. The issue of immigration was another major concern. The treaty that was ratified by all the member states allows citizens of the European Union to move freely from one part of the region to the other. Using their European Union passport, they can work anywhere within this economic block. A section of the Britons felt that this arrangement made it possible for foreigners to take away their jobs very easily (Farage, 2016). By leaving the union, the number of immigrants from European Union member countries may reduce. However, the number of jobs is also expected to go down as firms move away from the country. The problem of immigrants will be addressed, but the next effect of this decision may be a further reduction of employment opportunities instead of increasing it.

Some politicians felt that being a member of European Union had reduced the political power of the United Kingdom. They equated it to being colonized by the Union because the country could not make a proper political stand without consulting the union. To them, the country had lost its sovereignty to the union. Leaving the EU was the only way of regaining full political independence. This decision will make this country more independent in its political decisions. Nevertheless, the country must appreciate that it will lose its political ability to negotiate with other political blocks because of lack of support by other countries. According to D’Anieri (2016), the issue of national security also contributed to Brexit vote. Some Britons argued that the free movement of people across its borders was exposing it to threat of possible terrorism. It was easy for plotters of terror attacks to move from other European countries to United Kingdom and execute their heinous attacks because their European passports reduce scrutiny of these foreigners. It is possible that reducing the movement within the country’s borders may help in combating terrorism.

Benefits of leaving EU

According to a study by Pouryeganeh (2015), leaving European Union may have a number of benefits to the United Kingdom. One of the main benefits that this country will get by leaving the union is regulated immigration. The current arrangement under EU allows for free movement of EU citizens into and out of the country. This new system will give the United Kingdom full control over its national border. The expenses that the country has been incurring in form of regular contributions to the union will be eliminated. The country will be able to spend this money in other areas such as improving housing sector. The government of the United Kingdom will be at liberty to negotiate with other countries or economic blocks without worrying about the decision that may be taken by other countries.

Alternative steps that the UK should have taken

Some scholars and citizens of the United Kingdom have argued that there would have been alternative solutions to the problems cited above other than leaving the European Union. One such possible alternative is to negotiate the free movement of EU citizens from one country to another. The government of the United Kingdom should have raised the issue with justifiable reasons and the union would have considered amending its laws and agreements to limit this movement. Some of the politicians argued that the country is spending a lot at the expense of other important projects such as national housing. This problem could have been addressed differently. The government should have given a clear justification of making such contribution (Peet & LaGuardia, 2014). The financial benefits of being in the union should have been stated against the associated costs. By having these facts, the citizens of this country would have seen the rationale of making these payments to EU. The argument that was put forward that United Kingdom had surrendered its sovereignty to European Union was a political propaganda that was not countered properly by the government at that time. The issue would have been addressed effectively trough proper explanation to the citizens


The decision by the citizens of the United Kingdom to leave European Union came as a shock to a section of the society. The country and the European Union at large have to be ready to deal with the consequences of this decision. In the discussion above, it is apparent that the decision will have serious economic impact on the country. The economic relationship that this country has had for a long time with its neighbors may change following this major decision. It may lose some its main economic and political allies soon after leaving the union.

Foundation for future research

The Brexit vote is going to attract attention of many scholars who will be looking at the relevance and impact of such decisions. It will be important for these scholars to look at the long-term effect of this bold move. It may help in providing information about the relevance of these economic blocks. This study is an important foundation for future research as scholars work to determine the long term effect of this exit from European Union.


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