With the upcoming EU referendum raising many questions regarding the consequences of either leaving or staying within the EU the impact on the global economy is an important factor to take into consideration.
Leaving the EU will cause disruption to current UK trade and therefore will also impact Britain’s trading partners and consequently disrupt the global economy. However there are many uncertainties concerning Brexit (the UK leaving the EU) as it’s hard to predict the reaction and therefore retaliation from other EU members and how current relationships may change. The impact on the global economy will depend upon how many changes occur as a result of Brexit, for example there are still the possibilities for the UK to leave and remain as part of the single market, similar to Switzerland and Norway.
The EU is currently the largest player in the global market and the world’s biggest trading bloc, without Britain the strength of the EU in terms of its global position may be altered. However the severity of this all depends on how much the UK ‘leaves’ the EU, as with a pro stay government it’s unlikely that Britain will completely leave all aspects of the EU behind.
Some economists believe an ‘amicable divorce’ is possible with Britain being able to be free from regulations regarding home affairs and other areas of policy yet able to still trade within the single market. This leaving strategy would arguably have a much smaller impact on the global economy as Britain would continue to trade with the EU in a similar way to its current one.
However others have made conflicting claims, that remaining EU members would not allow Britain to pick and choose the aspects of the EU that they wish to be a part of but instead the UK would be forced into a clean break approach, having to pay EU export tariffs yet still having to comply with EU standards. This option implies that Britain would lose one of its main benefits of being part of the EU, free trade, and may impact trade and exports with EU members. With over 52% of the UK’s exports going to the EU these tariffs may result in Britain expanding into alternative markets outside the EU and strengthening already established relationships with markets such as the US, China and the UAE who are already our top three trading partners for exports outside the EU. These changes in Britain’s exporting and importing habits will impact the global market as trading relationships change due to Brexit.
The extent of the alterations to the global market from Brexit is currently unknown as with the UK’s leaving strategy yet to be established it’s difficult to predict exactly how Britain’s trading activity and therefore the global market will change. However it is unlikely that the UK will make drastic changes to trade taking into account the pro stay government, and also considering how important the EU has become to the UK in terms of exporting.