As of 2023, the United Kingdom is the only sovereign country to leave the European Union. Brexit was proposed by Prime Minister David Cameron (conservative party) in January 2013 during his speech in Bloomberg, in which he called for reform of the EU and promised an in–out referendum on the UK's membership if the Conservative Party won a majority at the 2015 general election. The Conservatives won 330 seats at the election, giving Cameron a majority of 12, and a bill to hold a referendum was introduced to Parliament that month. The date for the referendum was set to be the 23rd June 2016 and had a turnout of 51.89% of voters casting their vote for Britain to leave the European Union. Cameron (a ‘Remainer’) handed in his resignation the following day and was replaced by Theresa May who commenced the 2-year negotiation process. The UK officially withdrew from the European Union at 23:00 GMT on the 31st January 2020.
Since 2020, substantial evidence has been found to show that Brexit has been a major factor in the reasoning for the UK’s slow recovery post-COVID and was the only G-7 country projected to shrink in 2023. Business share of investment in the UK’s GDP has fallen by over 15% due to an increase in import tariffs and bureaucracy
causing it to be more costly and less efficient for business owners. Furthermore, an extensive number of businesses have lost their passporting rights which leaves them unable to move and operate freely in the EU which affects the services sector- a vital part of the UK economy. Many believe Brexit was not an economic project but more of a political agenda being utilised by the government by allowing for British sovereignty and freedom of trade with the rest of the world.
Although the UK is one of the most underperforming G-7 nations, since COVID, unemployment has recovered drastically faster than its competitors such as France and Germany. This has mainly been down to restrictions imposed on migrants entering the country meaning there are less people out of work due to frictional unemployment. This can be viewed as a positive yet the employment in the UK is currently below the target of 2.5% which is referred to as ‘overemployment of labour’, this reduces real incomes as inflation rises- too much money, chasing too few goods.
Furthermore, after the referendum, the pound had an initial sharp decline due to uncertainty between UK and EU relationships- so investors and holders of large quantities of pounds started to leave. In addition, due to high level of inflation, that pound has seen an overall weakening due to lack of international competitiveness caused by rising inflation. In contradiction to this, the pound has had rises in PPP (purchasing power parity) due to positive UK-EU future developments which rise the confidence of offshore investors buying pounds. However, these are short-lived as uncertainties remain prevalent throughout the negotiation process.
After withdrawing from the EU, the UK regained their control over its regulations and laws. This allows for establishments of new policies, yet it also requires the UK to look for new trade agreements and frameworks, which can be time-consuming, costly, and complex. It also gives power back to the UK government for the control of immigrants flowing to the country, reducing this can save money for the government but also can reduce workforces in the future.
It is essential to consider these are the short-run impacts that the UK has experienced so far, and Brexit was proposed for the benefit of the economy in the long-run. Many of these factors discussed could evolve over time and greatly depend on the UK’s ability to negotiate and establish new trade deals and adapt the economy for the new realities of the post-Brexit world.