In a global economy that is absolutely intertwined, where the creation of a simple mobile phone requires parts that can be traced all over the world, is it worth it to strike out alone as a nationalistic power? This is the question that Great Britain is answering, nearly 4 months after the terms of Brexit became official, which effectively removed them from the European Union. In a quest to create more international trade instead of relying only on the European Union, Great Britain has upended their financial world and has changed the game of trade throughout the European Union, and therefore the world.
The economic impact of the Brexit decision has been vast, even after only 100 days. Over 450 U.K. financial services firms (including 92 money managers) have moved out of Great Britain. “Money managers and insurance firms have also transferred more than £100 billion ($138.3 billion) in assets to Europe because of the U.K.’s withdrawal from the European Union.”
As the New York Times reported, 7 percent of Britain’s gross domestic product are financial services, so this rapid loss of business is alarming and many experts say it will affect their bottom line long into the future.
“The shift in business, assets and legal entities will gradually chip away at the U.K.’s influence in the banking and finance industry in Europe and around the world, as a greater proportion of business is authorized by and conducted in the EU,” New Financial said.
Besides financial ramifications in the world of finance, the movement of goods and services has changed drastically in only four months. “Goods exports plunged by 41% and imports by 29% as the UK’s departure from the EU’s single market had a major impact.” This has affected businesses large and small in every corner of the United Kingdom.
What Has Changed
The effect of Brexit has been immediate, with goods and people held up at the border. This has affected the way businesses interact with each other, the way imports and exports are trafficked, and even something as simple as how healthcare is administered. The supply chain has seen shipping delays, customs hold ups, extra paperwork, and a general log jam at the border.
The farming industry has been hard hit. Euro news reports that the UK Food and Drink Federation show a “75% fall in exports to the EU in January — salmon collapsed by 98%, beef 91%.” Britain maintains it is because of Covid-19 and stockpiling, but it “much was likely due to new non-tariff barriers.”
The ramifications of Brexit are far reaching. Although some items have been designated as tariff free, like medicines and cars, the loss of business and the slow trade have really affected the country. Even fishing has been a cause of contention, with the EU wanting the rights to fish in United Kingdom waters.
Speaking of the sea, there have been large ramifications for oyster fishermen in the United Kingdom because of Brexit. NPR reports, “That’s because leaving the European Union has triggered environmental rules that make it much harder for British fishermen to sell oysters to Europe, which is pretty much his entire market.” Just a few short months ago, oysters were harvested, cleaned, and sent to the EU for a hefty profit. Now the oysters have to be cleaned once they get to the European Union, and many end up dying in transit.
Many industries have been hit hard by the supply problems, and the automobile industry has surely felt the impact. Mike Hawes, CEO of the Society of Motor Manufacturers and Traders (SMMT) said, “I would characterise all the industry as paddling furiously below the water to keep things going. In terms of general day‑to‑day operations, moving parts in and out, it is difficult. The administration is significant… This is the new normal; we accept that. Ensuring the entire complexity of the supply chain can continue to operate is a major challenge.”
The old normal was a world filled with belonging, where the United Kingdom belonged to something greater than itself and received those perks of the European Union. The checks and balances were normal. “The lesson from Brexit is, you can’t have your cake and eat it.”
Perks for European Union
With fewer businesses now home-based in Britain, the European Union has experienced a boom in business, and many cities are happy to take in the influx. The 450 institutions that are moving out of the UK have to go somewhere, and other parts of the EU have benefited from Great Britain’s Brexit decision to leave the European Union and set off alone.
Reuters explained that “Dublin has emerged as the biggest beneficiary with 135 relocations, followed by Paris with 102, Luxembourg 95, Frankfurt 63, and Amsterdam 48.” In particular, since January, Amsterdam has found the largest share trading, when it was always London that held that role.
Because the European Union can trade effortlessly with other countries without worrying about slow supply chains and crossing borders, it stands to reason that they will benefit.
How Britain Plans to Stay on Top
With the debacle of the first hundred days behind them, many in the United Kingdom are looking ahead to succeed on their own. They will hone their relationships with other individual countries in order to do this. They want to trade internationally and not just with the EU. “It’s doubling down on the international business,” Miles Celic, chief executive of the CityUK, said.
According to CNC, “The U.K. would place highest priority on ties with the U.S. while at the same time “tilt” its international focus toward the Indo-Pacific.”
With their stellar reputation in the financial world, and the relationship they hold with major international centers, Great Britain business planners have faith that their idea will work out. They plan to take companies public, and also try special purpose acquisition companies, (public shell companies that look for private companies to buy). Amsterdam has been stealing their thunder since Brexit took effect. Other business people have their hearts set on Fintech, financial technology which use Challenger banks like Revolut and Monzo, which are banks without brick and mortar.
As for the trade impediments, there are no immediate solutions to the logjam at the borders or accommodations for small and independent businesses who have been affected by the loss of the European Union as an ally.
In conclusion, the first hundred days have proved challenging, and it is the common people that are suffering the most, just trying to make a living. Although Great Britain certainly has a reputation of reinventing itself over the last few centuries, they will need to dig deep in order to make this work. The bubble that they have wrapped around themselves has a good chance of popping, and the world is starting to wonder if staunch nationalism is worth the loss of a trade relationship with the European Union.