Brexit: Analysing the impact
                     Brexit: 
Analysing the 
impact
Introduction
Brexi t  i s  an abbreviat ion of  two Engl ish words:  
'Br i ta in '  and 'ex i t '  and refers to  the  wi thdrawal  
process  of  the  Uni ted K ingdom (UK)  f rom the 
European Union (EU).
Source: www.lamoncloa.gob.es 
Affect the economy
Brexi t  and the  terms of  the new UK-EU re lat ionship 
could aff ect the  economy through trade and 
investment,  immigrat ion,  regulat ions  and EU 
budget contr ibut ions.
Source: commonslibrary.parliament.uk
Economic impact
Th e  UK ’ s  f u tu re  t ra d i ng  a r ra ng em ent s  w i t h  the  EU  –  t he  
UK ’ s  l a rges t  t r a d i ng  pa r t ne r  –  a n d  t he  re s t  o f  t h e  wo r l d  w i l l  
p l a y  a  c ruc i a l  ro l e  i n  de t e rm in i ng  B rex i t ’ s  e c o n o mi c  i m pa c t .  
A t  p resen t ,  t he  UK  i s  i n  the  E U  S i ng l e  Ma rke t  a n d  Cu s to m s  
Un io n ,  ens u r i ng  ve ry  l o w  ba r r i e r s  t o  t r a d i ng  w i th i n  t he  EU .
Source: commonslibrary.parliament.uk
Trade agreement
A scenar io  where  the UK leaves  w i thout  a  t rade deal  
wi th  the  EU and reverts  to  ‘WTO ru les ’  i s  l ike ly  to  
resu l t  in  UK  economic  output  (GDP)  be ing  lower  in  
the  long- term than a  scenar io  where there  are  fewer  
barr iers  to  UK-EU t rade,  such  as  in  a  comprehens ive  
f ree  t rade agreement .
Source: commonslibrary.parliament.uk
Government’s long-term 
analysis
On 28  November  2018 ,  the  Government  pub l i shed  i t s  
ana lys i s  o f  the  l ong - term impact  o f  B rex i t  on  the  
economy.  
I t  compares  how  b ig  the  economy w i l l  be  –  as  measured  
by  GDP i n  fi ve  d iff eren t  fu tu re  t rad ing  scenar i os  re l a t i ve  
to  a  ‘base l i ne ’  scenar io  o f  the  UK  s tay ing  i n  the  EU.
Source: commonslibrary.parliament.uk
Government’s proposed 
deal
Based on the Government’s  Ju ly  2018 White  Paper 
and i ts  pre ferred opt ion.  In  this  scenar io,  the UK is  
essent ia l ly  in a customs union with the EU.  
Barr iers  to t rade with the  EU are fa i r ly l imited.
Source: commonslibrary.parliament.uk
European Economic Area
Where the  UK is  a member of  the EEA ins ide  the  
Single  Market ( inc luding f ree movement of  people)  
but  not  in  a customs union with the  EU.
Source: commonslibrary.parliament.uk
Free Trade Agreement 
(FTA)
A scenar io where the UK and EU s ign a f ree t rade 
agreement.  I t  i s  assumed there  are no tar iff s on 
goods and non-tar iff  barr iers  are equal  to those in  
an average trade deal  w ith the EU.
Source: commonslibrary.parliament.uk
Long-term impact 
Th e re  i s  o v e rw he lm i ng  o r  ne a r-una n im o us  a g reem ent  a m o ng  
ec o no m is t s  t ha t  l ea v ing  t he  E u ro p ea n  Un io n  w i l l  a d ve r se l y  
a ff ec t  the  B r i t i sh  ec o no m y  i n  th e  m ed i um -  a nd  l o ng - t e rm .  
Su rvey s  o f  e c o no m is t s  i n  201 6  sh o wed  o v e rwhe l m ing  
a greem ent  tha t  B rex i t  wo u l d  l i ke l y  reduc e  t he  UK ' s  rea l  pe r-
c a p i t a  i nc o m e  l eve l .
Source: commonslibrary.parliament.uk
Single market
Accord ing  to  economis t  Pau l  K rugman,  B rex i t  suppor ters '  
asser t i ons  that  l eav ing  the  s ing le  marke t  and  cus toms  
un ion  migh t  i nc rease  UK  expo r ts  to  the  res t  o f  the  wor ld  
a re  wrong .  
He  cons iders  the  cos ts  o f  B rex i t  m igh t  be  a round  2  pe r  
cent  o f  GDP.
Source: commonslibrary.parliament.uk