Brexit and its complications

Brexit may come at a huge cost to many of the trading nations of Britain.

Under the Euro, EU member nations maintain a single market to maximize the benefit from the Union. But nine EU member nations, including the United Kingdom, don’t use the euro.

The areas that support a Brexit are mostly concentrated along much of England’s east coast. According to a study by a team of polling experts, Brexit is most popular in South Staffordshire followed by Havering, Gravesham, Boston, Kings Lynn, Mansfield, and Tendring. Interestingly these are also places that do not have a huge student or graduate population.

Britain will vote on June 23 to reach a decision on whether it wants to be a part of European Union or not. Named after the popular terminology, ‘Grexit’ (Greece exiting Eurozone), the discussion around Brexit has gained momentum.

A big reason why many are against a Brexit is that the economic consequences faced by the country may be drastic, especially when the European Union has open trade barriers for Britain.

The referendum of a possible Brexit has created a stir in the markets creating high levels of uncertainty. The decision is crucial to economies of Britain and the rest of Europe.

The International Monetary Fund has also cut Britain’s growth forecast to 1.9% this year in comparison to 2.2% in January. In its biannual World Economic Outlook, IMF warned, “Negotiations on post-exit arrangements would likely be protracted, resulting in an extended period of heightened uncertainty that could weigh heavily on confidence and investment, all the while increasing financial market volatility.”According to the Fund, a Brexit will disrupt the financial flow and will adversely the economies of scale and efficient specialization.

Besides  trade, Brexit is likely to have a negative effect on the foreign exchange rates. HSBC reported that a Brexit could cause the pound to fall 20% and is likely to wipe 1.5 percentage points off the British economy.

International relations of Britain with the European Union may feel the strain, depending on how the UK decides on an exit. Brexit may set a trend for other nations to rethink their membership. According to the online publication Politico, parties in the Czech Republic have raised the possibility of a Czexit.

© 2016 Deena Zaidi. All rights reserved.

Below is an Infographic that outlines the basics of a Brexit: