Brexit is the term used to mark the event when the United Kingdom (U.K.) officially left the European Union (E.U.) trading bloc to define new living, working, and trading conditions for the British citizens on January 31st, 2020. Fast-forward to 2023, the U.K. economy is reeling from the effects of a messy separation with E.U. trading bloc, the global COVID-19 pandemic effect and the current Ukraine-Russia war.
On the third Brexit anniversary, the International Monetary Fund predicted that U.K. will be the only G7 economies to go into recession with an expected contraction of it economy by 0.6% in 2023. Even E.U. is expected to recover with an economic growth of 0.7% in 2023 (See image below – 4th vs. 10th row):
Discussion Questions:
- View the video, “The Brexit effect: How leaving the EU hit the UK”, and
a) Note down two takeaways you have from the effect of Brexit on small business owners,
b) Imagine you are the Chancellor of the Exchequer (or U.K. Finance Minister), discuss what advise you would you give the Prime Minister of U.K. to turn around the negative impact of Brexit to earn Brexit Dividends.
- Read the article, “The UK and the global economy after Brexit”, and
a) Complete the table below with data from Figure 1 of the article:
| Countries | Pre-Pandemic 2017 Q1 | Peak Pandemic 2020 Q1 | Post-Pandemic 2021 Q4 |
| Australia | |||
| Canada | |||
| France | |||
| Germany | |||
| Japan | |||
| Italy | |||
| Spain | |||
| U.K. | |||
| U.S.A. |
b) Determine if the U.K trade has not recovered from the global COVID-19 pandemic as quickly as the other G7 economies by comparing the 2nd and 4th column entries of all the G7 economies in the table above.
c) Review Figures 2 to 5 and summarize a key finding from each figure.
d) Compare Figures 6 and 7 and explain the role of trade, foreign direct investment and immigration in the U.K. economy from Pre-Brexit to Post-Brexit.
e) Share with your team/class your findings and whether U.K made the right decision of withdrawing from the E.U. trading bloc. Do explain.
- What do you think is the effect on U.K.’s Aggregate Demand, AD curve due to Brexit?
- A movement on the AD curve – which direction? Do explain the movement OR
- A shift of the AD curve – which direction?
Which component(s) affected this shift – C, I, G, X or M? Do explain.
- For U.K.’s Aggregate Supply, AS curve, do you think the impact of Brexit over the last three year affects the Short Run Supply Curve or the Long Run Supply Curve? Do explain your choice.
- Self-reflection: Now that you are aware of the impact of Brexit, what is your preference:
a) Open economy supporting globalization in trade OR
b) Close economy advocating nationalization with support for local industries/firms within the country’s border?
Do explain your choice.
Sources| BBC: https://www.bbc.com/news/uk-politics-32810887; IMF:https://www.imf.org/en/Blogs/Articles/2023/01/30/global-economy-to-slow-further-amid-signs-of-resilience-and-china-re-opening; Investopedia: https://www.investopedia.com/terms/g/g7.asp; PIIE: https://www.piie.com/research/piie-charts/uk-and-global-economy-after-brexit; YouTube: https://www.youtube.com/watch?v=wO2lWmgEK1Y; Gov.uk: https://www.gov.uk/government/ministers/chancellor-of-the-exchequer; The Balance: https://www.thebalance.com/aggregate-demand-definition-formula-components-3305703, https://www.thebalance.com/aggregate-supply-what-it-is-how-it-works-3306216; Unsplash: https://unsplash.com/photos/aLoN4KX1xSA