QUESTION

Topic:- ANALYSIS OF THE IMPACT ON CROSS BORDER TRADE IN UK DUE TO BREXIT

Literature Review Assignment 

Overview:  A literature review is an evaluative account of what has been published on a topic by scholars and researchers.  The purpose of this assignment is to facilitate your abilities to research a topic of study so you can learn to:

(1) identify and formulate an inquiry question that defines what you’d like to learn,

(2) know how to search and locate literature (e.g. books, journal articles, etc.) using library and internet resources;

(3) analyse the information found, and

(4) synthesize new knowledge into a written literature review and (5) establish context for your inquiries.

Thus, writing a literature review helps you develop and demonstrate two valuable skills:

Research: the ability to scan the literature efficiently to identify a set of useful articles and/or books and to obtain those materials. 

Critical Evaluation: the ability to apply principles of analysis to identify unbiased and valid studies.

Assignment Description: For this assignment you are asked to complete a 2,500 words literature review on a topic area in International Business or Marketing. You are to include around 20 sources on your topic. Half of your sources must be journal articles or books. You may use credible websites (including blogs) for topic/industry specific reports, to gather expert opinion and reports from specific organisations, etc. Papers should comply with UU Harvard Referencing Style

ANSWER

ANALYSIS OF THE IMPACT ON CROSS BORDER TRADE IN UK DUE TO BREXIT

1.0 Introduction

1.1 Identification of research topic

Brexit is the exits of the United States from the Europe union which has an enormous effect on the trade of the business operating on both nations. The free and smooth trading situation was hampered and the business has to suffer a lot. Majority of the business operating in the United States has to leave the market of Europe. This report seeks to identify the impact of the trade across the cross border in the UK due to the Brexit. The proper research and detail study has been conducted to identify the significance of the event and its impact on the business operating in the UK and their trading policies.

1.2 Importance of the problem

The indication rate of England has risen by 1%, it was 2% in 2017 while now it is around 3% due to the Brexit. The rise in the rate of all most all products was a witness after the event. 2.6% of increment was seen in the manufactured products while there was around 2.7% increment in the price of the transport equipment. 1.1% of the increase in the rate in the food products (Dhingra et al. 2016, p.22). It has been identified that the business of tobacco and petroleum has also undergone increment as the impact of trade due to Brexit. The major affected industries were the automobile industries as well as the food and drink industries. The elevation in the price of the automobile was about 10% while that of the food and drink sector was registered to be 20% increments. The main reason behinds the 14.4% sterling depreciation (Dhingra et al. 2016, p.22).

1.3 Aims

• To investigate the impact on Cross border trade of UK due to Brexit

• To research of change in the business structure of the UK due to Brexit

• To evaluate the changing business environment of Cross border trend of UK

• To recommend strategies for reducing the negative impact of Brexit on Cross Border trade of UK

2.0 Research Questions

• What is the impact of Brexit on cross border treads of UK?

• What is the change in the business structure due to Brexit?

• Who to evaluate the changing business environment?

• What strategies can be implemented for reducing the negative impact of Brexit on Cross Border trade of UK?

2.1 Research aim

To execute proper aims to identify the impact on cross border trade in the UK due to Brexit. The research also aims to identify the problems that are faced by a business operating in the UK.

3.0 Literature review

3.1 Cross border Cooperation

The origin of Ireland in 1922 has established the free trade between both the EU and the UK. The UK was able to trade freely across the border and establishes a successful business there. A Common Areas for Travel (CTA) was formed due to an agreement in the year 1952. However, the cross border trade has identified a conflict between the EU and UK. It has been analysed that the EU membership is different from that of CTA. As opined by Davis et al. (2017, p.22), there was an acceleration in the cross border trade in the year 1994. The main motive of the cross border corporation was for the business companies to operate freely across the borders without any kind of confusion or conflict. The deteriorating situation between EU and UK after the exit of Britain from training from the other states of the EU has created a panicking situation among the business industry. The corporation was established to form a stable trading situation among the different nations.

3.2 Outcome of Brexit

The major impact of the conflict between the UK and EU as well as the Brexit was on the north and south of Ireland. The worst impact was seen in Northern Ireland with the immense reduction in the trade-related investments. As mentioned by Cappariello et al. (2018, p.35), the slowdown of economic was identified as the major impact of the Brexit. The countries mainly the UK suffered uncertainty in the labour force with the rapid reduction in the money and material market. The north Ireland counties with major part of the UK suffered from low productivity rate. As opined by Fergus et al. (2018, p.110), the fall in the FDI rate in the UK with the increment in the price of the products has been identified. However, Ireland was at the same time benefits by the Brexit as it was the last English speaking country of EU.

3.3 Trade within Europe

The main reason behind the trade-related issue in the UK is mainly due to the deteriorating relationship between Britain and Europe Union after Brexit. The major consequences of this were the effect on cross border trade. As mentioned by Sampson (2017, p.163), the price of the commodity increased immensely and the business is suffering at its extreme. The regular divergence between the two countries is the reason behind the regular increase in the trade complicity and the increment in the product price. There has been a boost in the goods of Britain by eliminating the members of European states by about 55% which is almost equal to 130 GBP (Dhingra et al. 2016, p.22).

According to the accord of Swiss-style, it has been identified that relationship based on FTA the UK based business are in terms of negotiation with the other sectors and are even experiencing the single market operation. They are not willing to conduct marketing operating the business with the other states of Europe. This has a significant impact on the trading conditions of the UK. It has been identified that there are only few Europe based countries that are facing deflect in trade due to the event of BREXIT.

However, it has been identified that the GDP rate of the countries such as Poland, Belgium, Hungary, Slovakia and Netherland has increased by 1% due to their trade with UK (Dhingra et al. 2016, p.22).

3.4 European Integration theory

The emergence of these theories was in the year 1960. The emergence of the power of Europe as a leading nation and their increasing control over the life of the people of the UK we saw in this period. The entire rules and boundaries were controlled by the government of the EU. There was an origination of tension between the nationalities and the states of EU. As viewed by Minford (2019), the communities in Ireland which connected the EU with the UK has increased the cohesive nature of the business operating in both the countries.

The evolution of path work has integrated into the multiple identities of continuous access to negotiation. As opined by Jafari and Britz (2017), the increase in the power of European countries and their strict rules on the other started has created a lot of problems regarding the operation of trade and commerce between the countries was the main reason between the UK and EU. Thus as an effect to this, the UK decided to exit from the trade policies of the UK and aimed not to operate and trade with the states of EU.

3.5 Brexit model

Five models are associated with the Brexit impact on the EU and UK among which the most used and commonly recommended model is Swiss and FTA based model on Brexit.

Norwegian style agreement: The made full utilisation of the single market by the UK with the joining of the Europe Economic Area. However the rules and regulation of the EU were mostly influencing factor.

Turkish style union of customs: In the process of adoption of products from the EU, UK avoided the terrifying barriers. As mentioned by Hoekman et al. (2016, p.20), there was a lack in the sector coverage of that of the customs union was identified in this model.

FTA based approaches: The relationship between EU and UK was looked up by the FTA. There was an immense need in the trade of UK in depth which in other words means the UK needs to follow the rules regarding trade and commerce among the different nations.

Swiss-style bilateral accords: In this accord, both the nations EU as well as the UK agrees to form bilateral agreements regarding their trade-related conflicts. However, UK agreed to follow the rules and regulations formed by the FTA but with certain negotiations.

MFN-based approach: Trade condition in the UK was under the treaty of rapid loss due to the common external tariff of the EU. As viewed by Howarth and Quaglia (2018, p.1120), no barrier in tariff, however, has originated with time which is considered to be a liberal approach of trade by the UK

3.6 Impact of Brexit on various channels of UK

Foreign direct investment

The UK is the most famous place for Foreign Direct Investment, It has been identified that the attractiveness of the UK in the investment has seen a downfall due to the closing the gate of trade with EU. The impact of Brexit has a severe effect on the Trade policies of UK. The major advantage the UK has on the Brexit is their language as well as their location is identified for the investment and conduction of business. UK has the ability to attract about 40% of the business alone from the side of the EU. The international corporation of the UK is around 36 % which is huge as compared to the other business states of EU (Howell, 2018, p.89). It has also been identified that the ability of the UK to attract other investors other than that of EU is around 27% (Dhingra et al. 2016, p.22).

Figure 1: Foreign direct investment

(Source: Influenced by Dhingra et al. 2016, p.22)

Liberalization and regulation

The UK has been aiming to operate a single market notion which is not possible in the long run. The profit maximisation of the business and the expansion of the UK based business are difficult in coming future. As mentioned by Amewu, Mensah and Alagidede (2016, p.25), it has been identified that it is not each for the UK to operate with a single market in the world economy. However, having a severe effect on the economy the UK has been considered as one of the most liberal nations in terms of trade. UK plays a very important role in the shaping of the policies by indulging in the debate with the EU.

Figure 2: Liberalization and regulation

(Source: Influenced by Amewu, Mensah and Alagidede, 2016, p.25)

Industrial policy

It has been identified that the research centres of the UK are mostly associated with the business in the EU. As opined by Jongeneel, van and Vrolijk (2016, p.30), the industrial sector will be benefited with the operation of the business in the single market but the sectors will face immense drawback due to the loss in their business cover in the different states of EU. This factor has a moderate impact on the trading policies of the UK. A huge amount of funding is received by the UK from the Council of European Research. The UK, however, has an important target on the emission reduction. The leeway gain of the UK in the run over some active policies of EU has been identified under certain models.

Figure 3: Industrial policy

(Source: Influenced by Jongeneel, van and Vrolijk, 2016, p.30)

Immigration

Immigration of the certain age group of the population is very dangerous in the policy of the business. As stated by Zhang and An (2017, p.22), the main reason behind the increase in the immigration rate is the absence of proper stability between the cost and benefit of the country. It was identified that the net finance of the country increases with the availability of the proper younger generation. The skill of the younger section of the society enables the business to grow and make a profit even in the confliction cross border trading conditions. As opined by Portuguese (2018, p.49), the Brexit has a significant impact due to the immigration of the people. The rapid increase in the rate of hostility among the other states by the UK has been an important measure taken in the context of Brexit.

Figure 4: Immigration

(Source: Influenced by Portuguese, 2018, p.49)

Financial services

The financial service of any country completely depends upon the trade relation and associated policies of the company. It has been identified that around 17% of the cross border bank lending has been conducted in the UK alone. As influenced by Baier and Welfens (2018, p.12), the foreign exchange turnover of UK has been around 41% while the trade deviation of the country is around 7% (Dhingra et al. 2016, p.22). The Brexit is able to regular the debts of the country. However, it has been identified that the impact of Brexit on this factor is moderate and does not affect the sector much.

Figure 5: Financial services

(Source: Influenced by Baier and Welfens, 2018, p.12)

Trade policy

The UK has its own trade policy and are operating on their own rules and regulations. The strict trade rules associated with the trade were the main reason for the conflict between the EU and the UK. The trade policies adopted by the UK are not as par with that of the WTO. It has been identified by Zakeri et al. (2018, p.1201), that UK finds himself more exposed to that of the solving disputes with WTO. The trade deals of UK are flexible and are changeable. Brexit has a very moderate influence on the trade policies of the UK. Thus, it has been considered that the UK falls in the lower priority of trade when compared with that of the EU.

Figure 6: Trade policy

(Source: Influenced by Zakeri et al. 2018, p.1201)

International influence

The business of the UK is being benefited by the market of both EU as well as that of the UK. The dimension of the business will decrease with that if UK stops any trade relation with the other states of the EU. As opined by Obschonka et al. (2018, p.1290), it is very difficult for both the nations as the consequences of the rapid loss in the smooth running of the business in both EU and UK will be affected. However the Brexit has a moderate significance on this event, it has been taken into consideration that the country is sure to see a downfall in the coming years.

Figure 7: International influence

(Source: Influenced by Obschonka et al. 2018, p.1290)

Budget

The net contribution of the UK is around 5.8% to that of the total expenditure made by the EU (Dhingra et al. 2016, p.22). UK is considered the second huge contributor to the markets of the UK behind Germany. In the case where the UK is stepping out from their contribution, the other country needs to come up to contribute to the deficiency of investment made in the market. The Brexit has a moderate effect on the budget-making of the UK.

Figure 8: Budget

(Source: Influenced by Dhingra et al. 2016, p.22)

Uncertainty

The business of the UK and EU is facing a huge risk of instability. It has been identified that the business will unable to maintain stability (Zakeri et al. 2018, p.1201). Deflect in the investment rate and deteriorating FDI rate in the UK will affect the fundamentals of the business and the nation will be needed a proper framework of the Nation.

Figure 9: Uncertainty

(Source: Influenced by Zakeri et al. 2018, p.1201)

4.0 Methodology

4.1 Research Design

The research design is the technique of conducting research in an organised manner. Normally there are around three types of research design which are the Explanatory, Exploratory and the Descriptive research design (Bell, 2005, p.25). As the research topic is mainly based on the description of the impact on trade due to Brexit thus both explanatory and exploratory research design has been discarded and the descriptive research design has been selected for the proper execution of the research project.

4.2 Data Collection

Relevant secondary data has been collected with the study of the relevant resource has been collected for the proper execution of the research topic (Easterby-Smith, 2002, p.45). The identification of the impact of cross border trade in the trading policed of UK. The consequences of it on the business environment of the nation are identified. The resource of the last 5 years was collected and the research is completely based on the secondary qualitative and quantitative data.

4.3 Data Analysis

Mostly qualitative and quantitative data are used for the analysis of the data that are collected for the execution of the research topic (Gummesson, 2000, p.22). However, as this research is completely based on the secondary data collection hence the entire study is based on the qualitative data analysis. There was less use statistical data used for the understanding of the procedure and the proper explanation of the qualitative data was done to provide a proper understanding of the selected topic.

References

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Baier, F.J. and Welfens, P.J., (2018). The UK’s banking FDI flows and Total British FDI: a dynamic BREXIT analysis. International Economics and Economic Policy, pp.1-21.

Bell, J. (2005) Doing Your Research Project, A guide for first-time researchers in education, health and social sciences, 4^thed. Open University Press

Cappariello, R., Damjanovic, M., Mancini, M. and Caffarelli, F.V., (2018). EU-UK global value chain trade and the indirect costs of Brexit (No. 468). Bank of Italy, Economic Research and International Relations Area.

Davis, J., Feng, S., Patton, M. and Binfield, J., (2017). Impacts of Alternative Post-Brexit Trade Agreements on UK Agriculture. (3). p.22

Dhingra, S., Ottaviano, G., Sampson, T. and Van Reenen, J., (2016). The impact of Brexit on foreign investment in the UK. BREXIT 2016, 24, p.2.

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Jongeneel, R., van Berkum, S. and Vrolijk, H., (2016). Brexit: Breaking away–would it pay?. EuroChoices, 15(2), pp.26-33.

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