Introduction
"Brexit" is an abbreviation of "British Exit", meaning the exit of the United Kingdom from the European Union.
On 23 June 2016, in a referendum organized by former Prime Minister David Cameron, 51.9% of Britons chose to leave the EU. Following the launch of Article 50 of the Treaty on European Union on 29 March 2017, the United Kingdom and the 27 other EU Member States have two years to prepare for the effective exit of the country. Until March 29, 2019, the country remains a member of the European Union.
Appointed in July 2016 and renewed in June 2017, Prime Minister Theresa May is leading discussions on her country's exit from a team of negotiators representing the European Union.
The political consequences of Brexit for the European Union are difficult to predict. For some, the exit of the United Kingdom is a catastrophe: in fact, the European Union loses one of its three great powers, one of the most important financial places in the world, the first diplomatic partner of the United States in Europe as well than one of the only European states maintaining a consistent regular army.
For others, it can help to unite the Union: the United Kingdom is historically one of the least favorable countries for European integration, its exit may encourage other states to move forward. In parallel with the negotiations with the United Kingdom, the Twenty-Seven have begun to reflect on the future of the European Union, which could lead to a number of institutional reforms.
Through this file, in a first part we will see the key Economic implications of Brexit for the European Union. We choose to study 3 countries, such as: France, Germany and Ireland.
In a second part, we will see the economic implications of Brexit for Great Britain.
To finish, we will see the Final Brexit Agreement politically and economically.
The key Economic implications of Brexit for the European Union, referring Germany, France and Ireland.
A look at Germany‘s position and implication on Brexit
People supporting the Brexit hope that Germany will have a position in favor of the UK in the forthcoming negotiations. They‘re hoping because they say that the German industrial lobby would put pressure on Berlin to keep the market open for goods made in Germany, and that without London on its side it would be difficult to handle Europe‘s security challenges.
The most important for Germany is the stability and the integrity of the EU, considering that in the post-war Germany, an European integration has always been considered as a national interest. This interest has been adopted to the German Basic Law. Article 23 says that “with a view to establishing a united Europe, the Federal Republic of Germany shall participate in the development of the European Union that is committed to democratic, social and federal principles, to the rule of law, and to the principle of subsidiarity.”
However, Germans have a strong connection to the European Union, taking into account that being part of alliances is important to 78 per cent of them.
A survey conducted in Germany April 2017 regarding opinions on possible strong economic damage in Germany due to Brexit has shown that only 18 per cent of the respondents think that Brexit will affect the German economy heavily. 76 per cent think it will have no impact, while 6 per cent don‘t know.
Considering the implication of the financial sector due to Brexit, 26 per cent of German bank managers expect a considerable strengthening of Germany and foremost Frankfurt as a financial center. 57 per cent predict a slight strengthening, while 17 per cent can‘t imagine it.
Among German business founders or senior managers of small companies a maximum of 50 employees, 79 per cent think that Brexit will have no impact on their business. 16 per cent expect a negative impact, while 5 per cent expect even a positive impact.
Considering the economic activity among them, 37 per cent await an increase in costs and a decrease in export opportunities. 21 per cent think about needing to modify their investment plans.
Economically, Germany and the UK have a very close relationship. In 2017, Germany exported goods and services to Britain worth 84,36 billion and imported for 37,14 billion from the UK.
Brexiters argue that this huge trade surplus wouldn‘t be easily endangered by Germany. The problem with this argument is that the winners of free trade are mainly the consumers which benefit from cheaper import prices and a high variety of goods and services due to the competitive pressure of trade.
https://www.economicshelp.org/blog/141607/economics/who-are-the-winners-and-losers-from-free-trade/
In reverse, a trade deficit means a dependency on imports, which would be more expensive due to trade barriers. Indeed, according to the Society of Motor Manufacturers and Traders, the trade association for the United Kingdom motor industry, list prices for European cars imported into the UK could rise by an average of £1500 if tariffs were incurred.
Subsequently both, British consumer and German car manufacturers would suffer from higher trade barriers.
For the further negotiations, Germany will have a neutral position. In Berlin, the German politicians strive for a solution which preserves the EU due to the threat of disintegration of the whole alliance. For that, the EU-27 member states have to agree on a common position. Among the German society, 40 per cent think the EU should be open for compromises while 58 percent would like to adopt a firm negotiation position.
Germany wants to seek a mutually beneficial economic relationship with Great Britain, but with the condition that the EU should remain the political forum that defines the rules and regulations of this relationship. Berlin therefore wants to insist that the free movement of labor remains a cornerstone of the EU's single market and demands a preferential access by EU workers to the UK labor market. As exchange, Britain would get access to the EU market for goods and services. Last, Germany wants Britain to stay involved in the key European security issues, but only after agreements within the EU first.
As advice from a German perspective, the UK should make clear how it can contribute for a stable, secure and prosper European Union after leaving the alliance, in order to get Germany’s support in further negotiations. The Brexit should be a lesson for Germany, to reflect attentively why it has become unattractive for Britain to remain in the EU, so it can change and improve the European ideas with the other countries.
Data from the Organization for Economic Cooperation and Development (OECD) forecast that the annual domestic demand growth rate of the UKs final consumption, investment and stockbuilding expenditure by the private and public sector will decrease from 1,4 per cent in 2018 to 0,8 per cent in 2019.
The key Economic implications of Brexit for France :
The consequences of a departure from the United Kingdom of the European Union seem very negative for France. Then, it appears more uncertain in the medium term in their possible benefits.
If subsequent free trade agreements are not concluded with the EU, France will be among the six countries most affected by Brexit according to the firm Euler Hermes.
On the side of the economic factor we have some major companies who will support the negative aspect of this Brexit. French companies could record up to € 3.2 billion of additional export losses by 2019, in the worst case. That is still representing 0.5% of total exports of goods and services. It’s too bad at the moment the activity shows signs of recovery.
Les Hauts-de-France region also has strong economic link to the U.K. Its official, François Decoster, stresses that “in the automobile sector, there are major concerns regarding future relations with the U.K, particularly on the part of the car maker Toyota, which operates in the region. For example, 13 percent of Yaris exports in 2016 went to the U.K.”.
Concerning the divestment of French companies in the United Kingdom and British companies, in France would reach 5.2 billion euros in case of exit without free trade agreement.
"A Brexit can only have negative effects on economic activity in France, whether through the decline of the pound sterling or following a possible recession," says AFP Juliette Bertiaux, expert in the House of Commerce and Industry Paris Ile-de-France.
While waiting the verdict of the polls, "the criteria for obtaining loans began to be hard for Anglo-Saxons and banks require more counterparties in exchange for funding with very low rates," says AFP Philippe Taboret, deputy general manager of credit broker Cafpi, which has an international department intended in particular to finance real estate purchases of British in France.
From a social point of view, we can see that the situation about the expat will be difficult for French people. About 300,000 French live in the United Kingdom, two-thirds of whom live in Greater London. With Brexit, the residence conditions of the French and other Europeans would initially align with those of foreigners from countries outside the European Economic Area (EEA), with uncertainty about the possibility of staying there job loss.
Also, for British people, it will have a very big disaster. France also has one of the largest populations of British expatriates, with 400,000 subjects of his Majesty established on its territory, particularly in the southwest. It is estimated that there are about “15% of real estate sales that are put on stand-by until June 23th 2016, for real estate agents had started very well, "says Roger Haigh AFP, responsible of the Franco-British delegation of the Dordogne Chamber of Commerce and Industry.
Erasmus then. Admittedly, the favorite destination of European students is Spain, but Great Britain is the favorite destination of French students (1/3 of cases), internships in companies and teachers (1/3 of the mobility of European teachers) .
From the legal Factor point of view, we have also a lot of movement. There are concerned about the port of Calais. If the U.K. leaves the single market and customs union as is the government’s stated aim “the police and customs authorities will have to treat the U.K. like any other third country, for example by applying the common customs tariff to goods originating in the U.K,” the submission reads. “This could have a negative impact on the fluidity of trade flows between the ports of Calais and Dover,”it warns.