The impact of Brexit on business in the UK will depend entirely on what scenario emerges from the negotiations between the EU and UK. In the case of a ‘soft Brexit’, where the UK remains in the single market and customs union, the impact on business might be relatively muted.
According to Kevin Amess, an associate professor at Nothingham University Business School, it is likely that under such a scenario the UK would still have to maintain elements of EU law and regulations with little political influence over them. This, however, would facilitate trade with the EU, the UK’s largest trading partner.
Restricting immigration has the potential to reduce the pool of talent that business can draw on. But any additional flexibility that the UK may or may not gain in developing trade deals globally would, at the margins, be beneficial.
However, if a ‘hard Brexit’ scenario materializes, where the UK leaves the EU single market and customs union and reverts to world trade organization rules, this is likely to increase costs of exporting and importing to and from the EU, and dampen economic growth. It also has the potential to make the UK and less attractive location for foreign direct investment, but this will also depend somewhat on a number of other factors including the business environment that emerges.
For the UK, being a part of the single market has always been an attractive factor for foreign investors because it meant free trading across EU countries. If the UK decides to change its policies and not have access to the single market, then it could have potential impacts on FDI performance in the coming years. Although, this is the analysis of most people, the pro-Brexit group has a different point of view. They are emphasizing on other factors, such as competitive edge and global supply chain connections, that make the UK an attractive destination for foreign investors. They believe strongly in the UK’s ability to pull in investment will continue irrespective of Brexit. So, the uncertainty prevails, at least for the next two years while the UK makes negotiations before implementing Lisbon Treaty Article 50.
Global Trade Agreements
After Brexit, the UK is likely to have more control over negotiating trade deals and agreements with the non-EU countries. On the other hand, it may lose the negotiation power that it had as a member of the EU. Negotiations around the world are increasingly moving towards Blocs such as EU, ASEAN, and NAFTA, so this means that the UK will have more challenges negotiating as an individual country with other large economies like India, China, and the USA.
While some sectors in the UK’s trade may benefit from higher negotiation control, there are others that will also be affected. Industries that depend on migrant labour could be impacted after Brexit. Let’s look at some factors that describe the impact Brexit will have on the international trade of the UK.
Regulations Affecting Trade
There is uncertainty as to how regulations will affect the UK post brexit. If the UK wants to have continued access to the single market, it will have to abide by EU regulations. The regulations from other countries would be deal based and individual. According to OECD, the UK’s labour markets and enterprise sectors are among the least regulated. There are conflicting views on whether there will be more positive or negative effects after Brexit.
Migrants and Labour
The implications Brexit will have on the labour market and migrations will be determined by negotiations between the UK and the EU following the divide. If the UK wants to have access to the single market, it will have to accept the free movement of people from EU countries into the UK.
People who are pro-Brexit have suggested that the UK must adopt the Australian points based system for immigration. However, if the UK introduces a work permit system for EU migrants, it would involve a lot of cost and paperwork required to process the permits.