Brexit is an issue of great concern because of its possible consequences. It is anticipated to affect not only Britain and its people but also the majority of European countries as far as their economy is concerned. Depending on the deal it will be associated with, the expected outcome is going to differ among various sectors of economy.
More specifically, according to a study by the Division of Economic Analysis and Research of the International Capital Markets of the Greek banking group, the sectors that are mainly expected to be affected are investment, the banking and financial sector, trade, the labor market and public finances. However, the economic implications of this country-specific decision are likely to vary according to the particular ties that link it to the United Kingdom, the form of the future UK trade cooperation with the EU, and the initiatives of the competent authorities in order to mitigate the adverse effects.
As far as countries which depend on the European budget due to their poverty are concerned, the impact could prove significant, as the United Kingdom is one of the major donors of the Community budget. Therefore, its withdrawal from the EU may affect the size of the EU budget with negative consequences for the funds currently available for those poverty-afflicted nations. Among other things, prolonged political uncertainty and the new trade relationship between the UK and the EU can negatively affect the European economy, both directly through trade and tourism, and indirectly through the slowdown in the Eurozone economy, which may lead to a decline in investment, thus hampering the stabilization of the domestic economy.
Another possible implication is that the British vote in favor of Brexit could significantly reduce the margins of negotiation between government of European countries in-debt and their lenders for the implementation of the pre-requisite measures for their payments mainly due to the development of Euroscepticism in Eurozone countries (“Which are the financial consequences of Brexit for Europe?”, 2016). As a result, every European country might be dealt with as unreliable and not trustworthy to make deals with.
In the medium term, the negative effects of Brexit will lead to a possible decline in exports of goods and services to the United Kingdom due to depreciation of the Sterling compared to the Euro. There is a strong positive correlation between Britain’s economic growth rate and that of the EU-28. A particularly important sector of economic growth in some European countries, such as Greece and Italy is marine transportation and the fact that a great percentage of merchant fleet is managed by London, the consequences of Brexit are expected to place a heavy burden on some European shipping companies. That is because they are going to be anticipated to move and suffer the related relocation costs. Apart from ship transportation, another major pillar of economic development in Europe is tourism, which is expected to be hit in the short and long term. According to another recent study by Eurobank’s Economic Analysis Division, the depreciation of Sterling, as well as the likely decline in per capita income in the United Kingdom, will negatively affect profit per traveler, as well as total profit from British tourists (“Which are the financial consequences of Brexit for Europe?”, 2016).
Regarding the south European region, the vote in favor of Brexit is undoubtedly a negative development for its real economy. However, if there is a rapid separation of Britain from the EU, potential impacts are assessed as manageable, as the economic ties of that region to the UK are relatively limited, and the focus is on the slowdown of the Eurozone, which is the main trading partner of Central and Eastern Europe (“Which are the financial consequences of Brexit for Europe?”, 2016).
Furthermore, as far as the impact of Brexit on the energy sector is concerned, it is impossible and quite premature to have a full assessment of the effects of the UK’s withdrawal from the EU on the European Energy Union, as there is uncertainty about both the Brexit implementation process and the European Energy Association itself (“Which are the financial consequences of Brexit for Europe?”, 2016). According to Thomas Cunningham, Deputy Director of the Atlantic Atlantic’s Global Energy Center, there are some key issues that need to be addressed at this early stage (“Which are the financial consequences of Brexit for Europe?”, 2016).
Firstly, there are issues related to the consequences of uncertainty in the financial markets. It is clear that there are thoughts that concern the abandonment of a number of energy projects after Brexit, such as the new £ 18bn EDF Hinkley Point nuclear power plant in the Somerset region of the UK, despite the reassurance of the French energy company EDF, who is the main supporter of this particular project (“Which are the financial consequences of Brexit for Europe?”, 2016).
Moreover, the price of oil and gas deposits in the North Sea is high, although it is gradually decreasing. According to energy analysts, even if Britain becomes independent of EU markets, the value of these will remain extremely high for international companies. If, in fact, Scotland decides to follow and abandon the EU, the question arises whether the benefits of exploiting these deposits can be obtained from London or Edinburgh (“Which are the financial consequences of Brexit for Europe?”, 2016).
Secondly, issues concerning the impact on the United Kingdom in the event that it “leaves” the EU energy market. On the energy security side, the United Kingdom is in an excellent condition: it enjoys a high level of diversification in terms of fuel mix, country of origin of the energy supplied but also of transit routes, while its energy dependence on imports from other countries is below the EU average. Since the United Kingdom will not pay EU fares, it is unlikely that it will benefit from cross-border EU energy infrastructure projects such as PCI beyond the current funding flow until 2020 (“Which are the financial consequences of Brexit for Europe?”, 2016).
Last but not least, according to the Atlantic Council’s expert, there will be no significant impact on the EU due to the collateral referred to in the recent EU legislative package on security of supply in such a case. Others point out that there will be debates for developing energy issues that could not be developed with UK involvement (“Which are the financial consequences of Brexit for Europe?”, 2016). Brexit facilitates Brussels’ efforts to achieve an ambitious energy efficiency target, which Britain had never desired before.
In addition, the effect on economy is anticipated to become evident thanks to the radical changes Brexit will bring about in the trade of goods between the UK and the European Union. Products worth billions of euros blocked in customs, price increases, endless waiting and bureaucracy; it looks like a commercial nightmare, but it is the next day’s scenario for products coming from the UK if the country eventually leaves the European Union without a deal. Customs formalities will be applied, customs declarations will have to be submitted and customs authorities may require guarantees for potential or existing customs debts (European Commission, 2018). Tariffs will apply on British products without preferences. In addition to conventional commerce, chaos will prevail in online markets as well.
Bearing all the above into consideration, it is apparent that Brexit is going to have plenty of consequences on the European markets. One can only speculate their possible severity, as plenty of them might be unpredictable and catastrophic to major sectors. The future of the European Union is dependable on the sustainability of the countries, which compose it.
Therefore, any possible abandonment of the Union is going to create an irreparable crack in its consistency, with unprecedented consequences.