Question

BREXIT QUESTION

From a macroeconomic standpoint, what are the implications of the UK leaving the European Union in the global market? Is the pound expected to rise or fall and why? Economically speaking, does Brexit hurt the UK's relations with other nations around the world?

Answer 1

The implications of the UK leaving the European Union are as follows:

a. Trade : The trade between the UK and the European union will take a dig because of the grater barriers to the trade if Brexit happens as compared to the case when the UK was a part of the EU. The trade will become expensive.

b. Investment ; The capital flows will get impacted because free flow of capital will not be impacted. Thus, initially investment might fall and UK might lose the status of the world's biggest financial center.

c. Immigration: There will not be free flow of labor and labor mobility will suffer which might have an impact on the production level and production in the economy might decline.

This might lead to falling of pound in the initial years. This is because the reports state that it will lead to large scale capital outflow from the UK in the short run and this will lead to depreciation of pound.

Yes, the relations of the UK initially might be impacted because earlier the entire unit was functioning as a single unit under the name of European Union. The Brexit will hamper the relations and the UK will have to start afresh in building its international relations.