The Risks Around the Uncertainty of Brexit
The United Kingdom is bearing the scars of a car crash economy as the political crisis deepens in Europe. More and more companies are leaving the country, in a desperate attempt to avoid the probable chaos when the European Union finally dissolves. If the corporate exodus of the United Kingdom becomes a stampede, the industrial prosperity of the United Kingdom could be ruined forever.
The United Kingdom is heading towards the unknown. At this point, the government should have a much clearer idea of the impact that Brexit would have on the economy, but politicians seem increasingly bewildered about the consequences for the manufacturing industry, services and financial markets of the United Kingdom. The most palpable for consumers in the depreciation of the pound and the rise in prices from the Brexit.
British industry is heading towards an uncertain future without a strategy. It is far from what was expected when the United Kingdom joined the European Economic Community in 1973, when there was great hope that the United Kingdom could prosper with the accession to the single market. The new door to Europe would present innumerable commercial and business opportunities for British companies, economic growth would accelerate and the standard of living in the United Kingdom would improve. Now that the door is about to close, there is a real fear that the benefits unravel quickly.
It is also a very different vision from that imagined by former Prime Minister Margaret Thatcher, who saw Europe as a great opportunity for the United Kingdom when her conservative government came to power in 1979. Thatcher launched attractive tax exemptions and advantageous regional aid agreements. as gold lures for foreign companies to establish themselves in the United Kingdom, offering an easy way to enter the lucrative European market. Many companies such as Nissan, Honda and Toyota have flooded over the years.
As a result, the British auto industry, which was once insignificant in British manufacturing, is now one of the jewels of the British industrial crown, employing almost one million workers.
The arrival of foreign companies in the last four decades brought with it much-needed productivity and new work practices, which revolutionized the automobile industry and made the United Kingdom again a major exporter of automobiles. Brexit could change this overnight.
Thanks to Brexit, Japanese automakers, which account for more than 40% of British car production, could lose free access to the single market and be subject to significant export tariffs to Europe. Unless the United Kingdom can reach special agreements, Japanese automakers could easily enter Europe to bypass future trade barriers.
The abandonment of Europe is already affecting the economy, especially the British companies that hope to continue participating in costly joint ventures of the EU. British high-tech companies, especially in the aerospace and defense industries, are already suffering the consequences of being excluded from the bidding process for new contracts in euros.