Why Is Brexit Bad For the UK Economy?

The Brexit referendum was held on 23 June 2016. Any economist or economics tutor would say that it was generally considered a sad day for the British. The European Union was formed by six countries in 1958. Since the UK joined the European Union in 1973, it has benefited from it greatly. The European Union membership has helped the UK economy achieve high economic growth over the last four decades. The benefits of the European Union membership to the UK economy can be learnt by taking economics tuition at any reputable economics tuition centre in Singapore. However, the fruit of sustained high economic growth in the UK has not trickled down to low income individuals. As a result, the income gap in the UK has been widening which has led to widespread discontent among low income individuals and this was borne out by the fact that the majority of the British who voted for Brexit were low income individuals.

Decrease in Exports

The reason why 23 June 2016 was considered a sad day for the British by many is because Brexit is likely to be detrimental to the UK economy. The negative effects of Brexit on the UK economy can be discussed in terms of the negative effects on exports, foreign direct investments and the cost of production in the economy. As the UK is part of the European Union, tariffs are not imposed on UK’s goods in the European Union. Brexit will lead to re-imposition of tariffs on UK’s goods in the remaining 27 European Union countries, it will result in a decrease in UK’s exports. A decrease in exports in the UK will lead to a fall in aggregate demand and this will and result in a fall in the gross domestic product. The resultant fall in the demand for labour in the economy will lead to a rise in unemployment. One can take economics tuition from an experienced economics tutor to learn more about the effect of a decrease in exports on the economy. A good economics tuition centre in Singapore which provides top quality economics tuition is Economics Cafe Learning Centre which is located in the central part of the island.

Decrease in Foreign Direct Investments

In addition to a decrease in exports, Brexit will lead to a decrease in foreign direct investments in the UK. The European Union has a population of about 510 million. As the UK has a population of about 66 million, this means that the population of the other 27 European Union countries is about 444 million which is a large consumer market. As a result, many foreign firms invest in the UK in order to tap the large consumer market of about 444 million. It follows that Brexit, which will lead to re-imposition of tariffs on UK’s goods in the remaining 27 European Union countries and therefore reduce the incentive for many foreign firms to invest in the UK, will lead to a decrease in foreign direct investments in the UK. The relationship between tariffs and foreign direct investments is taught in most educational centres which provide economics tuition in Singapore. Economics Matters, a reputable economics tuition centre in Singapore, is one of these educational centres. Linda Geng, who is a renowned economics tutor in Singapore, is the Principal Economics Tutor at Economics Matters. A fall in foreign direct investments in the UK will increase the extent of the decrease in aggregate demand caused by the fall in exports resulting in a larger decrease in gross domestic product and hence larger rise in unemployment.

Rise in the Cost of Production

The primary motivation for those voting for Brexit is to tighten control over immigration. However, this may lead to a fall in the supply of labour in the UK. If this happens, wages will rise and this will lead to an increase in the cost of production in the economy. When the cost of production in the economy rises, aggregate supply will fall and this will lead to a decrease in national output resulting in a rise in unemployment. Econs Actually, a good economics tuition provider with an experienced economics tutor, provides economics tuition to those who want to learn economics for examination and for leisure.

Benjamin Tay

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