Impact of Brexit on UK and Asian Region

Question: Discuss about the Impact of Brexit on UK and Asian Region. Answer: Introduction Brexit is the withdrawal process of the UK from the European Union by April 2019 (Dhingr et al. 2016). The consequence of Brexit on UK and world economy is uncertain. Changes may come in political, economical and legal area of UK and bi lateral relationship with EU and other European and Asian countries. This paper studies possible impact on UK and Asian economy. Implications for Domestic UK Economy UK government abides by the rule of EU being a member country. Hence, there are restrictions in trade policies of Britain with the non European countries. Exit from EU may give UK more freedom of trade. However, trade relation with EU is uncertain. After announcement of Brexit, pound has been devalued. Figure 1: Devaluation of pound (Source: bbc.com 2017) As value of pound has been falling, exports from UK have been cheaper however, the import has become costlier. Increase in export is prospective for the economy as it helps to increase domestic income and standard of living of people. On the other hand, manufacturing sector industries are worse off due to increases in cost of imported raw materials. Therefore, price of manufacturing products are likely to rise, which may reduce consumer surpluses. Demand for domestic product in the international market my fall. Therefore, there would be possibility of increasing a current account deficit for UK economy. As mentioned by Bowler (2017), service sector is experiencing a fall in productivity due to Brexit. Implications for the Asian Region UK economy is has no significant trade relation with the Asian economy as a whole. There may be a possibility of decreasing demand for UK products in the global market. As total percentage of export to UK from Asian region is not significant, any change in demand would have no significant impact on the Asian economy. As stated by Financial Times, there is mixed effect on different countries of Asia. Simpson (2016) pointed out that china and Japan may be affected due to Brexit as the car manufacturer Nissan and Toyota both have manufacturing activities in UK. Therefore, any changes in business policy, trade and labour market policy would have impact on these companies and in turn on the countries. Moreover, around 140000 Japanese work in UK. Brexit may have negative impact on the foreign workers working in UK. UK has 0.7% share in Asian countrys GDP. Therefore, any decline in UK import only reduces less than 0.2% from Asian GDP (Ft.com 2017). However, devaluation of pound makes UK pro ducts cheaper. Therefore, import from UK to Asian region may increase. Recommendation and Conclusion It can be concluded from the analysis that Brexit would have mixed impact on the UK economy in terms of trade. On one hand, devaluation of pound facilitates UK export and on the other hand, import is likely to be costly to create current account deficit. Impact on the income of the domestic economy may be mixed. Brexit would have very little short term effect on the Asian economy as UK is not integrated significantly with the Asian market other than Japan and China. Analysing the implications of Brexit, it can be recommended to UK to take trade liberalisation policy in order to reduce risk and uncertainty of Brexit. UK government needs to be liberal to the foreign worker while reforming labour policies to reduce risk of job loss. References Bowler, T., 2017. How has the economy fared since the Brexit vote? Available at: https://www.bbc.com/news/business-36956418 [Accessed 14 Apr. 2017]. Dhingra, S., Ottaviano, G., Sampson, T. and Reenen, J. 2016. The consequences of Brexit for UK trade and living standards. [online] cep.lse.ac.uk. Available at: https://cep.lse.ac.uk/pubs/download/brexit02.pdf [Accessed 14 Apr. 2017]. Ft.com. 2017. How could Brexit affect Asia?. Available at: https://www.ft.com/content/c0679ee0-4d7b-3918-94c2-1833bb3ef327 [Accessed 14 Apr. 2017]. Simpson, C., 2016. What Brexit Would Mean for Asia's Economies. Available at: https://www.bloomberg.com/news/articles/2016-06-20/what-brexit-would-mean-for-asia-s-economies