Brexit is all set to happen on March 29, 2019. The European Union and United Kingdom have come to terms about the Northern Island border, UK citizens living in EU, EU citizens living in UK and UK debt to EU. Theresa May has now come to support Brexit because majority in the referendum voted for it. The implications to the UK economy are obvious since the pound plummeted the day after UK voted to opt out of EU. The pound value remains low compared to euro and dollar. However, UK has seen around 2 percent growth after Brexit in 2016. Unemployment fell and rising costs of houses have slowed down, even though inflation has increased.
The Financial Times estimated that UK had been losing £350 million per week because of Brexit. Economists have forecasted a further decline in GDP growth during successive years. A majority of the voters who supported Brexit are semi-skilled and would be the hardest hit. UK is under pressure because Scotland and Northern Ireland want to maintain ties with EU. Britain may already be losing its power in the world economy.
Coming to the latest estimates, the average economic growth is expected to be 1.5 percent per year, followed by rising unemployment and declining standards of living. UK now owes a large amount in debt to EU. A new study shows that UK would now by five times more susceptible to economic disasters. The EU may not incur compelling losses however, UK remains at the losing end for far greater economic shocks. There are great risks because UK relies on free trade deals with EU. UK is far more vulnerable to financial losses that other EU trading blocs. Now that UK is losing access to the single market and customs union, the economy would suffer. This also leaves UK in a weak bargaining position.
Britain is estimated to incur 12.2 percent loss in GDP, which is higher than 2.64 percent loss in GDP to EU following Brexit. The regions in UK that voted for Brexit face the greatest exposure to economic disasters. The regions that are at high risk include Cumbria, Gloucestershire, Wiltshire and North Domerset. The study states:
“UK regions typically exhibit Brexit trade-related risks exposure of the order of 10–17% of regional GDP, with Irish regions also displaying values of the order of 10% of GDP.
“The Irish regions therefore have levels of Brexit-related risk exposure which are similar to the UK regions with the lowest levels of Brexit exposure, namely London and parts of Northern Scotland.”
These regions are highly dependent on EU markets for trade and growth; yet they voted to exit EU. It would get extremely challenging for UK to make economic adjustments because the regions lack capacity to deal with economic disasters. EU citizens in UK feel insecure that they may not be able to enjoy as much freedom, despite the terms of agreement. The outlook for UK is full of apprehensions and uncertainties. It remains to be seen what policies UK devises to facilitate economic growth and whether they are sustainable. Otherwise, the UK has already begun losing its stronghold in global affairs.