Brexit – A probable success story

Brexit – A probable success story

Before and after Brexit vote, there has been a perpetual debate about the  future of UK economy regardless within the  EU or outside EU, there were many arguments presented in favour of NO (Brexit ) but perhaps not strong enough and, YES won.

Scotland leaders think, it could be a disaster for them and therefore Scotland is looking for second referendum. The UK Government have decided to start the divorce process by pushing the button of  article 50 on 29^th of March, one could argue that we should trust UK Government , their machinery, judgement and intention.

Although most of us know what Brexit means but just reiterating to set the context, UK will not have free movement of people and  in exchange all the Goods and Services coming to UK from EU will be taxed i.e. there could be a Custom and Excise duty tax on the Good and services coming to UK from EU, this could include food items and other products from EU, similarly EU will tax Good coming from UK, this tax could be similar to other countries ( China, India, US etc.) .

UK is one of the largest financial service providers in EU and Service sector is one of the key sectors in UK. One could argue that the service sector industries will now look to exit from UK and set up businesses in Dublin or somewhere in EU. I think one of the key reasons these businesses have set up their business in UK was because of immense size of talent pool available in UK market especially south of England.  UK have got European banks operating from UK, these Banks may have got offices set up in their countries i.e. there was no need to get the office set up in UK /London when these Banks have got presence in Europe and, these banks would have got their IT and Business presence expended in their local regions.  But, because of available talent pool these business opted to operate from UK with an existing operations in their local region.

London is one of the financial capitals for financial innovations ( Fintech ), last year BoE ( Bank of England ) issued over 50  digitalised Banks, these banks not only going take service sector to a next level but also going to decentralised banking ( with the help of PSD2 and open banking), this could also mean that the Service sector would not be specific  to big players but going forward, It will set out new precedence for the  sector.

There are circa 2.9m people living in UK from EU and circa 1.2m UK nationals living in EU.  if we make an assumption that after two years, EU nationals will have to apply for UK Work visa to work and there will be a discounted visa fee say £1000-1500 per application( much lower than regular fee per application) and only 50% people opt to stay in UK, this arrangement could bring  £1.45-2.1 billion to the economy. This money could further be invested in infra. projects etc. and could generate more employment, which could further mean more visa applications from Europe/EU.

But there are other consequences, which I think are also important.

Probable consequences	Impact	Opportunities
Higher Food inflation	Food inflation especially food product coming from Europe.           EU Custom and Excise Tax could be added to the products.	Higher inflation could make British products more compatible i.e. British farmers could retain more margins/profit.
Weak currency (£)	Expensive imports.            Higher inflation	Cheaper exports            Help to revive manufacturing industries            More price competitive products to other developing countries i.e. Custom and Excise tax is going to be constant between UK and other countries so weak £ could make it more competitive with developing nations. This could result into more jobs.
Higher general inflation	Expensive products           EU Custom and Excise Tax could be added to the products.	·         Local industry to grow.
Better engagement with Common wealth countries		Common wealth countries could offset Food products and Goods inflation as food from EU are going to be more competitive because additional tax from EU.

I think we should trust Govt. and ready to face some initial hurdle to the economy but in long run because of solid business foundation and retention of Service sectors will result into retaining most jobs, opportunities and, the UK will remain one of the key places in Western Europe for people to come and work. But, only difference could be that they might have to pay for the work visa rather free entry.