Question
What are the potential impacts of Brexit on British businesses?
Answer
The process of exiting the European Union constitutes a big challenge for British businesses. There are positive and negative aspects for British businesses. To begin with, British businesses have been impacted by the devaluation of the pound. This means that imports have become more expensive. The higher costs of importing goods from the rest of the world have been passed on the consumers, which might entail lesser revenues and a more depressed level of economic activity. In addition to this, Brexit means that British businesses that rely on the flow of funds from overseas sources might be affected (Bootle, 2014). This can be seen in the recent slump in construction projects and the reduction in the level of enrolment of overseas students in British educational institutions. It is important to underline that the climate of uncertainty generated by Brexit has also affected consumer confidence as well as the flows of foreign direct investment. At the same time, Brexit may have a silver lining. The potential exiting from the Single European Market and the Customs Union would mean that British business could thrive in a more deregulated environment, seeking new markets for goods and services in the emerging markets of Asia, Africa and Latin America (Hannan, 2016). The depreciation of the pound has already led to a hike in exports. Nevertheless, the ultimate success of Brexit depends on whether the process of exiting the European Union will enable Britain to capture new markets for the goods and services that it produces.
References
Bootle, R. (2014) The Trouble with Europe: Why the EU Isn’t Working – How it Can Be Reformed – What Could Take Its Place, Nicholas Brealey Publishing, London
Hannan, D. (2016) Why Vote Leave, Head of Zeus, London
