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What is the effect of the Brexit on the economy of the United Kingdom and the European Union?

Pre-University Paper 2016 16 Pages

English - Miscellaneous

Excerpt

Table of Content

1. Introduction

2. General Information
2.1 Definition of “Brexit”
2.2 Timeline of the Brexit

3. Development of the United Kingdom´s and European Union´s economy until the referendum
3.1 Impacts on the United Kingdom
3.2 Effects on the economy of the European Union

4. Development of the United Kingdom´s and European Union´s economy from the referendum to the exit
4.1. Implication on the United Kingdom
4.1.1. General economical situation
4.1.2. Financial markets
4.2. Impacts on the European Union
4.2.1. General economical situation
4.2.2. Financial Markets

5. Development of the United Kingdom´s and European Union´s economy after the exit
5.1. The United Kingdom as an “EEC State”
5.1.1. Main aspects of the EEA Agreement
5.1.2. Consequences for the British economy under the EEA Agreement
5.1.3. Impacts on the economy of the European Union
5.2. The United Kingdom as an EFTA State with bilateral Agreements
5.2.1. The Swiss Model
5.2.2. The possible consequences for the UK
5.2.3. Impacts on the European Economy
5.3. The United Kingdom as an independent European state
5.3.1. Basic outlines of the economic relationships
5.3.2. Consequences for the United Kingdom
5.3.3. The position of the European Union

6. Outlook for the Future

List of References

1. Introduction

On June 23rd 2016 the whole world had its eyes on the Great Britain, anxious to know whether or not the Britons would vote for the “Brexit”, which stands for the end of the British membership in the European Union. After weeks of "YES" and "NO" campaigns, the vote decided that 51,9 % of the British people wanted their country to leave the European Union.

In the following I will explain what the word Brexit means and shortly outline the course of events from the passage of the law for the referendum until the actual leave. Then I will take a closer look at the effects on the economy of Great Britain and the EU. I will structure this part into three fractions of time, describing the period before the referendum, the period between the referendum and the point of the exit and the time after the exit.[1]

2. General Information

2.1 Definition of “Brexit”

The word “Brexit” is a combination of the words “Britain” and “exit”. A similar word creation,”Grexit”, was first introduced by the press for the possible exit of Greece out of the European Union during their financial crisis. This was now changed into “Brexit” as a short form for the United Kingdom leaving the European Union.[2]

2.2 Timeline of the Brexit

In January 2013 the British Prime Minister David Cameron announced that in case of his re-election in May 2015 he would hold a Referendum about the topic if the United Kingdom should stay in the European Union. The deadline for this Referendum was set for the year 2017. The main reason for this step was that the British UKIP, an EU-critical party, had rising survey results.

David Cameron finally introduced a law concerning the EU-referendum into Parliament which was passed in December 2015.

End of February 2016 David Cameron announced the referendum to take place on June 23rd 2016. On this day 33 million Britons went to the ballot boxes. 51,9 % of them voted for the exit.

The next day Cameron declared his resign as Prime Minister, on July 23rd former Home Secretary Theresa May became his successor.

It is on her and her party now to plan and present the steps towards the British leave. It is expected that the negotiations for the exit will start in spring 2017. Once started Article 50 of the Treaty on European Union rules that the process of leaving has to be concluded within two years. So the point of leave will most likely be in the year 2019.[3]

3. Development of the United Kingdom´s and European Union´s economy until the referendum

3.1 Impacts on the United Kingdom

During the last twelve months before the vote took place, economic growth slowed down from 0,6 % to 0,4 %.[4] The growing uncertainty concerning the outcome and the possible consequences lead to postponing of investments and shifting money from the riskier stock markets to saver forms of investments like gold or annuity certificates. The Financial Times Stock Exchange 100 index (FTSE) which includes the one hundred strongest papers traded at the London Stock Exchange also shows that the British economy got weaker as the date for the exit vote came closer. Within the last twelve months before the vote the FTSE dropped from more than seven thousand points to close to six thousand.[5]

Chart: Development of the FTSE during the last 3 years[6]

Abbildung in dieser Leseprobe nicht enthalten

Chart: Currency Exchange Rate British Pound – USD (1 year)[7]

Abbildung in dieser Leseprobe nicht enthalten

3.2 Effects on the economy of the European Union

Like the FTSE the European counterpart, the EURO STOXX 50 index has gone down significantly before the Brexit vote was made.

The EURO STOXX 50 is a stock index which includes fifty leading stocks of the Euro-zone. As can be seen in the EURO STOXX 50 chart, the stock exchange fell ever since the referendum has been announced. On the one hand this decrease is based on uncertainty and fears of European investors and brokers. On the other it was likely be caused by brokers and investors who built risk into a stock to prevent a dramatic crash of the market. Notwithstanding the tension between the EU and the UK, the Euro has been a stable currency on the market compared to the Pound and has also been on an increase in the past couple of years. The fact that Europeans didn’t believe in the Euro being a stable stock can be seen as a reason for it being as stable as it used to be.[8]

Chart: EURO STOXX 50 (1 year period)[9]

Abbildung in dieser Leseprobe nicht enthalten

Chart: Currency Exchange Rate Euro-Dollar (1 year period)[10]

Abbildung in dieser Leseprobe nicht enthalten

[...]


[1] Cf. Source 1

[2] Cf. Source 1

[3] Cf. Source 1

[4] Cf. Source 9

[5] Cf. Source 2

[6] Cf. Source 3

[7] Cf. Source 4

[8] Cf. Source 5

[9] Cf. Source 6

[10] Cf. Source 7

Details

Pages
16
Year
2016
ISBN (eBook)
9783668450141
ISBN (Book)
9783668450158
File size
640 KB
Language
English
Catalog Number
v365529
Grade
1-
Tags
Brexit Economy United Kingdom 1 1- European Union Englisch Effect sehr gut 2016

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Title: What is the effect of the Brexit on the economy of the United Kingdom and the European Union?