BREXIT AND THE

BRITISH ECONOMY

EFFECTS ON

IMPORTS AND

EXPORTS

The UK economy was one of the fastest growing European

economies in 2016 with economic growth of 2%

After the British public voted in the Brexit referendum in June 2016, the

exchange rate of the British pound fell abruptly. For the consumer, this was

bad news, travel was suddenly more expensive, imports cost more, and

inflation increased.

The lower value of the British pound did help British exporters and improved

the overall situation in the next few months, however, most experts believe

exports will fall in the longer term.

It could deal a serious blow to the British economy which imports more than

half of its goods from EU member states and exports almost as much to it.

RELOCATION OF

BUSINESSES TO THE

EUROPEAN UNIONWhile Brexit's supporters have made the

preservation and creation of jobs for the

UK one of the spearheads of their

campaign, it's likely that UK's exit from the

European Union will be accompanied by a

relocation of some of the financial markets

to Paris, Dublin or Frankfurt.

Financial services play big role in the

development and growth of exports by

mobilising and allocating resources for

investment in businesses through risk

management and risk diversification.

As they start to leave the UK, investor

confidence in the UK economy is declining

which will ultimately lead to reduction in

British Exports to the EU.

The USA may not an easy market to open.

Many multinational companies from other sectors

are also planning to transfer all or some part of their

businesses to the EU.

Drinks giant Diego is moving its vodka

production out of Scotland to Italy and

the US.

-40% of games companies are

considering relocating to EU countries

after Brexit.

Customer and fancy-dress supplier Skiff's

made an announcement of opening an

office in the Netherlands as a result of

Brexit.

The migration of businesses from the UK

will lead to massive job losses in the coming

years and further bring down the economy.

IMPACT OF BREXIT ON THE UK

EXPORT AND IMPORT SECTORS

If Brexit negotiations lead to a hard Brexit, it'll mean a

complete break with the EU and thus a termination of

all treaties with the European Union which also

includes the Customs Union. However, the customs

union (free movement of goods) is only one of the

four fundamental freedoms granted to European

Union member countries. The other three are:

Free movement of people

Free movement of capital

Free movement of services

If the EU and the UK terminate the free trade

agreement, new regulations would be applicable on

the exchange of goods and services to and from the

UK. In the case of a "hard Brexit" without a

comprehensive free trade agreement, EU tariffs to a

"third country" would suddenly be applicable on

British products and services, which would have

considerable effects on both the UK import and

export sectors.

With a hard Brexit, the free movement of goods and people between EU and the UK will be

affected. In addition, EU trade policy measures applicable on a "third country" shall be

applicable on UK exporters which would make British exports to EU more difficult.

The customs authorities require a customs declaration for imports from third countries and

this must be submitted in electronic form.

Small and medium sized traders in particular might find it very difficult to bear the cost of

exporting, since, unlike large companies it will not be easy to establish strategic partnerships

and engage in sales cooperation, and find the skilled staff.

IMPACT ON

BRITISH EXPORTS

CONSEQUENCES FOR BRITISH

E-COMMERCE COMPANIES

After Brexit, the UK will have to establish its own

e-commerce regulation laws,

As soon as Brexit is a reality, UK will lose the common

domestic market with EU countries.

LONGER DELIVERY TIMES

Since deliveries from a third country have to go

through customs, this will lead to longer delivery

times, and add to the cost of running a business.

DATA PROTECTION RULES

The UK would become a third country with regards to

data protection laws. Transfer of data to and from a

third country faces more restrictions than transfer of

data between member starts of EU.

UK companies will still have to comply with all the EU

rules and regulations after Brexit. The EU General

Data Protection Regulation will apply from May 2018.

IMPACT OF BREXIT

ON UK IMPORTS

The provisions for intra-Community deliveries apply to deliveries of EU goods within the

European Union. As proof that the goods are really in the UK, an entry certificate will be

required. This is the only way to receive the relevant VAT refund. This will put extra

financial as well as regulatory burdens on EU importers.

Either the EU exporters will become less willing to send their products to the UK or they

will add the cost onto the product. In any case British consumers and importers will be

paying more.

The introduction of customs duties would also mean that imports of third-country goods

which are initially imported into the EU and then forwarded to the UK would be

subjected to multiple customs duties, same from the UK to the EU.

IMPACT ON THE BRITISH TRANSPORT

INDUSTRY

The consequences of Brexit on the

transport sector will be felt due to

diminishing economic activities between the

UK and the EU.

SHORT AND MEDIUM-TERM IMPACT

The economic impact of Brexit on the

transport sector is expected to lead to a

short-term reduction in transport volumes of

passengers and freight.

In the medium-term a significant reduction

in passengers and freight volume are to be

expected, as the decline in trade between

EU and the UK falls.

LONG TERM IMPACT

The depreciation of the British pound has already reduced the traffic from

the United Kingdom. It's estimated that by 2020, the UK air passenger

market will be 3-5% lower.

As there will not be a single market, regulatory aspects such as safety

regulations, passenger rights, market access, and take-off and landing

rights need to be renegotiated, resulting in higher prices.

However, regardless of whether the transport is being carried by air, sea,

rail or road, the forwarders based in the UK will not benefit from

unrestricted EU market access. International freight forwarders will have

higher costs. The re-introduction of customs duties will be accompanied

by direct cost increases in the logistics sector, as well as indirect cost

increases on activities such as longer waiting time for customs clearance

and additional administrative tasks.

ADDITIONAL

COSTSBrexit will result in British businesses

having to hire additional staff just for the

export and import paperwork.

Universities will also be under pressure to

create a curriculum for the new tax, import,

and export regulations, still to be created,

hire teachers, and administration staff to

manage paperwork.

Brexit will have wide-ranging impacts on our

economy. Now that the referendum has been

held and the decision to leave the EU has

been made.

Politicians need to seek sustainable win-win

strategies to shape the relationship with the

EU, to minimize the impact on businesses

and import and export sectors.

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