Figure Brexit Image.

Adapted by BBC 2017

BREXIT – Causes & Effects

Julio Ramos
GR 509 Global Finance| Summer 2017| ICCI
Overview
 Introduction
 The European Union
• History
• Stages of Economic Integration between Nations
• The EU Single Market – Main Characteristics
 BREXIT - Causes and Consequences
• Brexit with the EU
• Causes & Effect of Brexit
• Subsequent Events and Effects
• What's Next?
 Conclusion
Introduction

 Who – Britain & The

European Union

 What – Cease Partnership

 When – Mar 2017 – Mar
2019

 Where – Europe
 How – Referendum, Article
50
Figure Brexit Image. Adapted by Adam Smith Institute
Sep 2017
 The European Union
• Formed in 1957 after
World War II

• To Stimulate Economic
Growth

• Make countries
interdependent
• Avoid conflict and war

• Largest confederation of
states

• Single market single

currency managed by the
European Bank
Figure Expansion of the European Union. Adapted from the EU’s Official Website,
www.europa.com
The European Union

Figure Map of the EU States. Adapted from the EU’s Official Website.
 The European Union
• Stages of Economic Integration between Nations:
o Preferential Trading Area (PTA) - Trade agreements between EU and Least
Developed Countries (LDCs) designed with strategies for achieving
growth and prosperity
o Free Trade Area (FTA) –The free trade agreement that allows countries to
cooperate to reduce trade barriers to liberalize trade and investment.
o Customs Union (CU) – A type of trade block which is composed of free
trade area with common external trade tariff, but different import quotas.
o Single Market (SM) - Common market that seeks guarantee for free
movement of goods, capital, services and labor - Four freedoms.
o Monetary Union – Also known as the currency union that involves EU
sates to share a the same currency.

Source - (Krugman, et al., 2015).

The European Union
• EU Single Market – The Four Freedoms

o Free Trade in Goods – Businesses can sell anywhere in the EU

o Free Trade in Service – Business & Professional Services free
o Free Movement of Capital – Flow of capital and currencies
o Free Mobility – Study, Work and Live in the EU states.
The European Union – Trading power comparative

Figure The EU Trading Power. Adapted from the EU’s Official Website, www.europa.edu
The European Union – Comparative

Figure 4 The EU comparative. Adapted from the EU’s Official Website, www.europa.edu
Brexit Causes and Consequence
• The vote to leave

• The UK's referendum turnout was 71.8%, with more than 30 million people
voting.

• The slim result has contributed to the various speculations on the outcome of the
exit.

Figure 5 Brexit Voting Result. Adapted by Statista, June 2016

Brexit Causes and Consequence
 Reasons for leaving

 Immigration – Influx of immigrants from EU States

and Non-EU States in the last five years.

 Payment to the EU – Estimated EU € 18B.

 Sovereignty – Britons not keen on EU mandates that

are interpreted to creating a United States Europe.
Brexit Causes and Consequence

Figures - The UK’s Contribution to EU. Adapted from CNBC, March 2017
Developing-Country Borrowing and Debt

 Subsequent Events and Effects

• Britain’s New Minister - Cameron out May in.

• Outcomes of the Elections – “Brexit means

Brexit”…Theresa May

• Effects on the UK Economy – The pound is down all

other effects constant.

• Brexit talks with the European Union – Initiated Jun 2017

Brexit Causes and Consequence
• The UK and EU Negotiations

Figure 5 Brexit Voting Result. Adapted by Statista, June 2016

• First Talks (Jun 2017) – Preliminaries and courtesies

• SecondTalks (Jul 2017) –Negotiate Immigration, Exit Bill, Irish Border.

• Third Talks (Aug 2017) –DelayedTalks as both parties are at odds.

Brexit Causes and Consequence
• Brexit - Timeline

Figure 9 Steps taken UK leaving the EU. Adapted by BBC, August 2017
Brexit Causes and Consequence
 What's next – to be awaited
• Hard Brexit –The probability of a Brexit arrangement that will likely see
the UK giving up full access to the Singles Market, the Customs Union as
well as the EU .

• Soft Brexit –The probability that UK’s exit with the EU results as close as
possible to the current arrangement. This will probably result in goods and
services (keep passporting) that would be traded with the remaining EU
states on a tariff-free basis.
Brexit Causes and Consequence
 Alternative options after Brexit

Figure 5 Brexit Voting Result. Adapted by Statista, June 2016

• Establish separate arrangements with other Non-EU States - The are all waiting.
 Brexit Causes and Consequence
 What's next –
Recommendations
• Know and maintain what it
wants.
• The UK and the EU are not
to be swayed by Media
Sentiments as there has been
evidence of exaggeration.

• The EU to find Additional

Funds or solutions.
Figure Media Sentiment. Adapted by Harvard Business Review
Jul-Aug 2017
Conclusion
• Difficult to part ways due to good relationship.

• Pressures on both sides as it’s a first time exit.

• Possible Outcomes – conflicting sentiments.

• Finding a common ground – leaving in good terms.

• Thank you
• Questions and Answers
 Reference
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