Amity Business School

AMITY BUSINESS SCHOOL

MBA (Semester-1)

MANAGERIALECONOMICS

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BRIEF ABOUT EUROPEAN UNION

The EU has developed an internal single

market through a standardized system of
laws that apply in all member states.
Main aim to ensure free movement of
people, goods, services and capital with the
internal market.
The European Union is
a confederate politico-economic
union of 28 member states that are located
primarily in Europe.
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EUROPEAN UNION CONSTITUTE-

Austria, Belgium, Bulgaria,
Croatia, Republic
of Cyprus, Czech Republic,
Denmark, Estonia,
Finland, France, Germany,
Greece, Hungary, Ireland,
Italy, Latvia, Lithuania,
Luxembourg, Malta,
Netherlands, Poland,
Portugal, Romania,
Slovakia, Slovenia, Spain,
Sweden and the UK. 4
 WHAT IS BREXIT ? Amity Business School

Brexit is the term coined for Britains

referendum to exit the European union. The
referendum is due for voting on 23rd June
2016.
Momentum is growing behind the EU exit
campaign, which wants to end central
control by Brussels and give Britain the
freedom to manage its own affairs. 5
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WHATS THE SCENERIO?

This vote has been put in place by the idea
of giving more powers to the people of
Britain in decision making of their country,
rather than being the implementer of the
policies made in Brussels (headquarters of
European Union).
Britain trade rules are bound by the
European law, but post- Brexit, Britain can
negotiate the terms and conditions of the
trade with different countries. 7
 CONTINUED Amity Business School

The process is more complex and involves

lot of interdependent variables, like which
country trades more with Britain, which
one exports more to it or buys its goods etc.
Britain has been more of a importer than
exporter.

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EXPORTS v/s IMPORTS
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With a big economy and low resources it

is dependent on Europe, China and
India for its imports.
Europe being a free trade area has
been providing the free access to
markets for Britain until now.

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ECONOMIC EFFECTS ON BRITAIN

Stocks had their worst drop since the
financial crisis.
Has lost its top AAA credit rating.
Has to make new trade agreements with the
rest of the world.
Europhiles worry that foreign companies
will be less likely to invest here.

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Could relocate their headquarters if Britain

loses access to the EU's single market.
Good for exporters who have struggled with
the high value of the pound.
No longer have to contribute billions of
pounds a year towards the European
Union's budget.

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GLOBAL ECONOMIC SITUATION

The respondents felt that the overall

economic situation would remain difficult
for the next 2-3 years.
The global recovery remains weak and the
Brexit move is harmful to the overall
health of the global economy.
The exit from the European Union has
increased the risk of United Kingdom
falling into a recession.
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IMPACT ON INVESTMENT IN UK
United Kingdom has been the gateway to
Europe and the survey participants felt
that UKs position as a major investment
hub will get impacted over the near term.
The increase in uncertainty post Brexit
will impact the confidence level of
potential investors wanting to invest in
the UK.

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IMPACT ON BRITISH POUND

The investors have been pulling money
out of the UK and this may exert a further
downward pressure on the Pound.
The survey respondents based out of the
UK anticipated an increase in operational
costs over the near term due to this
pressure on the Pound Sterling.

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APPROX. 102.12INR TO 92.10INR

VALUE ON 27/08/16 88.18INR 18
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IMMIGRATION

The respondents expect more restrictions

on immigration in the United Kingdom
post Brexit. However, it was felt that the
restrictions on the other EU citizens will
be limited due to political reasons.
Indian immigrants may have to feel the
actual heat. The respondents indicated
that the move might lead to brain drain
from the United Kingdom.
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IMPACT ON INDIA
Rupee may depreciate because of the
double effect of foreign fund outflow and
dollar rise.
This will increase petrol and diesel prices
to an extent.
The government then may want to
reduce additional excise duty imposed on
fuel when it was on a downward
trajectory.
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Prices of gold, electronic goods, among

others will increase.
This will increase fiscal deficit, unless
revenue increased.
Information technology (IT) companies
with the largest exposure to the UK and
Europe fell the most.
The impact may be minimal for most
pharmacy firms as the US is their bigger
market, not Europe, after which comes
India. 24
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POSSIBLE GAINS FROM BREXIT

Less regulation.
Savings on European Union
contributions.
Ability to strike new trade deals.
Skills-based migration policy.

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POSSIBLE LOSSES FROM BREXIT

Possible tariffs on exports to the European

Union
Loss of access to the single market
Damage to the City
Drop in investment caused by uncertainty

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