The issues relating to Brexit and the possible solutions to resolving this issue. The article appeared in Free Press Journal.

1. Brexit concerns: The way forward
written by R Kannan January 3, 2019 8:33 am
When the Brexit referendum was put to vote in UK, the general expectation was that it would
remain in the EU. In the June 23, 2016 referendum, 17.4 million voters, 52 per cent, backed Brexit
,while 16.1 million, 48 per cent, backed staying in the union. The difference was only 4% of voters,
1.3 million. Since the time available for Brexit was 21 months from the date of referendum, the UK
government was hopeful that before the period gets over, they would be able to strike a deal for
post Brexit scenario with EU and other members countries and the Brexit process would be smooth,
less painful and could be achieved in a least effort with least cost. After the result of referendum was
out, it created ripples in UK. Looking at the thin margin, many felt that , Brexit would be bad for the
UK Economy. There were also talks that second referendum should be conducted, since the margin
was thin and for a event which would have significant impact for all the stakeholders, it was better
to reconfirm the mood of people again before going ahead with such a big economic reform. By end
of December 2018, the post Brexit deal is yet to be reached. This has created a lot of uncertainty in
the minds of all the stakeholders and will have significant short term impact on the UK economy.
Closer to the implementation date, it emerges that there are many issues relating to immigration,
trade barriers, cost of doing business, logistics, hospitality, business competitiveness and the need to
add many new departments and functions in various government departments with huge financial

2. outlays. Further, it has created a turbulence in terms of future of businesses, employees and the
economic growth. Brexit decision is a unilateral decision.
The ECJ, in its recent statement, opined that since UK decided to exit EU on its own, till the post
Brexit agreements are in place and the date of Brexit arrives, UK still has the discretion to withdraw
from Brexit. Of course, UK has to go through the governance procedures, indicating that it could go
through the process of parliamentary vote or any other procedure including a new referendum
which would allow UK to withdraw from its proposal to exit EU. As the dead line nears, the expert
predictions also indicate that the Probability of UK remaining in the EU has increased. There is an
increased concern and wish that UK withdraws from the process of Brexit. Considering the fact that
UKs trade with Europe amounts to 49% of its total trade, Brexit is likely to increase the cost of trade
in terms of additional procedures, transport delays, additional levies and reducing the ease of doing
business. Today many countries are focussing on liberalising the trade and set a goal to move
towards higher rank in ease of doing business.
In 2009, the ease of doing business rank of UK was at 5 and it slided to 9 by the year 2018. If Brexit is
brought in effect, UKs rank is likely to slide down further. Brexit will increase the trade barriers. To
reduce the impact of the barriers, the efforts should be to remove tariffs and eliminate non-tariff
barriers to trade. The assumption behind Brexit is that this would happen, which will not be true
when it comes to the implementation. When various expert studies predicted the loss of economic
output, one of the main reasons highlighted in those studies was the presence of new trade barriers.
Brexit will reduce FDI. Of the total FDI in UK, in Jan 2018, 42.6% of the investments were from EU
and from the companies which have strong ties with the UK. After the Brexit, the cross border trade
will reduce, thereby reducing the attractiveness of investments by EU companies in UK. Brexit will
have impact on availability of skilled employees. As of now, there are one million Britons living in EU
and 3.5 million citizens living in UK. EU has made a provision for UK nationals to remain in EU and
have introduced a scheme for them to stay in EU. But it is unclear what will happen to 3.5 million
from EU who are living in UK. Even UK nationals have started registering for citizenship in other
countries to avoid the uncertainty. After the Brexit, it is not clear how the dynamics will work out. If
EU citizens leave the country, it will create a big gap in skills required. This will also impact the
productivity of the economy. The relationship of UK with other EU countries will undergo a big
change.
At the same time, UK will have opportunities to consider other partners to expand its trade,
especially from Asia, the countries like; India, China, Malaysia, Vietnam, and Thailand. The
predictions by various experts on the post Brexit Scenario, project that there could be an economic
output gain of 7% to Economic output loss of 18%. Reduce the ease of doing business and reinstating

3. the barriers to trade is bound to reduce the economic output for both UK and EU. According to
various experts, to assess , whether the Brexit is good or bad, there is a need to make the
assumptions made for going for the Brexit vote transparent to every one.
While putting to vote, the action plans identified for how the migration would be handled has to be
discussed in detail. The post Brexit predictions by UK government includes, the incremental growth ,
which will accrue to the UK economy through non – Brexit policy related actions. While looking at
the post Brexit scenario, the effect of non Brexit policy related actions on economic growth should
be separated, so as to understand the real effect of Brexit on the future of UK economic growth. In
this world of VUCA, Brexit can have a negative effect on the UK and European economies. Whereas
the scope for achieving a very high economic growth through Brexit is very limited. Further, most of
the European economies are growing at the rate of 1 to 2 % and introducing a new uncertainty will
debilitate Europe when there are other factors like trade wars and withdrawal of Stimulus by US and
Europe.
In the light of this, the following options could be looked at in resolving this issue. The government
can take measures including , putting the proposal to vote in the parliament, conducting a second
referendum or adopt any other procedure as per the UK legislation, which allows the withdrawal of
the proposal to made to EU. This will help to maintain the status quo, removing all the uncertainties
for both UK and the EU. Till now, no deal has been arrived at and there is an immediate need to
decide on the way forward from March 2019. To reduce the impact of no deal, which is likely to be
very costly for the UK economy, in the event of deciding to proceed with Brexit,the following options
could be looked at. Send a proposal to EU to extend the time period of Brexit by another six months
to one year, go with the Brexit and allow the present arrangements to continue for six months to
one year, enter into agreements with each individual member country of EU, where the agreement
is similar to, mirror image of the one signed by UK to be part of the EU. By considering the above
options, UK should be able to come out of the short term uncertainty and will have time to look at
all the options which will ensure the continued competitiveness of UK economy and its long-term
stable future.
https://www.freepressjournal.in/analysis/brexit-concerns-the-way-forward/1428351
R Kanan is the Head of Corporate Performance Monitoring and Research, Hinduja Group. (Views
are personal).