Implications for the UK Businesses If the Country Separates from the European Union - Term Paper Example

?Implications for the UK Businesses If the Country Separates From the European Union The European Union (EU) is an economic and political associationof 27 states primarily located in Europe. The member states in the EU associates through a system of independent institutions and intergovernmental negotiated decision. Some of the institutions in the EU include the European commission, European Council, the Court of Justice of the European Union and the European parliament among others. Some of the member states in the EU include Belgium, Austria, Cyprus, Czech Republic, Netherlands, Poland, Portugal and Sweden. According to Dearden (1997), European Union (EU) is the United Kingdom’s (UK) most crucial export market, with the 2011 statistics indicating that the market accounted for 53% of the goods exported. United Kingdom involvement in the European Union has advantages and disadvantages which play a key role in the analysis of the implications of the UK businesses in the event of a separation. The essay below focuses on the impacts of the separation on imports, growth, politics, business and immigration as well as its advantages and disadvantages. Exports Some of the UK exports to the EU include weapons, pharmaceutical drugs, plastics, aerospace products, electronic equipments and books (Smith, 2005; UK Trade and Investment, 2007). One of the advantages of the sector is that it supports three million jobs. This implies that the population is poised to loose a high number of jobs in the event of a separation. Currie (2008) asserts that the growth in exports is the prominent factor that made UK to avoid the negative impacts of recession. However, if the country leaves the European Union it can still be allowed to sell their goods through single markets. Such a case has been successfully applied in Switzerland, Iceland and Norway. This will limit the powers and influence of the United Kingdom because the country will not be able to set the rules that govern the European market. Those who hold the opinion that the United Kingdom should detach from the European Union argue that this will provide an opportunity for the British manufacturers to focus on exporting to other destinations such as Brazil. This generates more income to the business fraternity. According to Frederick Taylor’s Theory of Scientific Management, the possession of abundant financial resources improves the economic proficiency or the productivity of the workforce. If the business people are assured of abundant profits, their productivity increases. Imports Most of the imports to the UK are manufactured products such as beverages, food, tobacco, chemicals, fuels and footwear (Pattichis, 2002). Separation will affect the imports that the UK obtains from the members of the EU. Britain also imports many goods from the members of the European Union. Milne (2004) study affirmed that the country imports more than its imports. The 2011 business statistics indicates that UK exported ?159bn compared to the imports that amounted to ?202bn (Great Britain, 2012). The deficit provides the country with a leverage to demand for budget rebates from other countries. However, this notion is misguided because the country can only import the goods they require and not the ones intended to benefit the exporting country. Such an economical benefit cannot be attained if the country separates from the EU. If Britain abandons the E.U, it may be obliged to impose more tariffs on the European imports. This will discourage imports leading to business difficulties because the market might experience shortages. The importers will also be disadvantaged because their competitive power will be lower than that of the local products. This will be contrary to Elton Mayo’s Behavioural Theory of Management because importers will feel singled out or victimised (Drucker and Maciariello, 2008). This will negatively affect the business proficiency of Britain in the European market. The EU market might respond to the increased exports in the UK market by increasing the tariffs imposed on the imports from the UK. This leads to market instability between the two regions. Economic Growth Separation from the EU will affect the economic and business growth of the UK. Detaching of the UK from the EU will stall its economic growth. This is because most external investors, mainly from the EU region will shy away from investing in the UK since it is not an affiliate of the union. The lowering in the number of investors leads to a decrease in the economic growth. For instance, the National Institute of Economic and Social Research (NIESR) estimate that the direct investment would decrease if the UK separates from the EU (Milzow, 2012). However, other analysts assert that separation of Britain from the EU may attract more investors because the country may seem like a better alternative, especially in consideration of the recent euro zone crisis (Biondi, Eeckhout and Ripley, 2012). However, such an assumption may not be viable. This is because different nations have various ways of affirming the different reasons affecting the business environment of a nation. Additionally, a country can be economically viable if its partnership with other countries is cordial and beneficial (McDonald, Tu?selmann and Wheeler, 2002). The study conducted by the British Chamber of Commerce estimate that the annual cost of the EU regulation to the UK economy is approximately ?7.4bn (Flood, 2011). Most of the business regulation laws set by the European Union cuts across all its members. If separated from the European Union states, Britain will only require relying on the British Competition authorities in protecting customers from being discriminated by the business corporations. The idea of the UK government to impose higher capital requirements on the local banking institutions compared to the other EU countries impacts negatively on the effectiveness of the banking sector (Josephs, 1999). Imposing such measures on the banking sector reduces the availability of finances for business; leading to reduced economic growth. This has made most of the British bankers to prefer remaining in the European Union due to the fear that they could be denied access to the vibrant European capital market if the UK abandoned the bloc. Lack of access to the lucrative capital market implies that the banking services in the United Kingdom will not effectively cater for the financial needs of the local businesses. Maintaining the cordial relationship with EU will place the UK at a better position to extend its interests to other nations such as China than when alone. The benefits of the business in the UK from the relationship with the EU emanates from the terms of membership. According to the Europe Agreements, the member states have tariff-free access to EU markets for most of their products. Separation implies that they will not be able to enjoy such benefits that are variably crucial for businesses because small enterprises are able to expand their market base. Separation of the UK from the EU will make the EU lack the numerous benefits that are associated with the membership to the EU. Involvement with the European Union enables the UK to expand its internal markets leading to enhanced trade. More trade specialisation and the access to more, markets as well as raw materials leads to more efficient allocation of the expenditure and resources (Oppel et al, 2004). Separating from the European Union implies that the local business in the UK have lower chances of diversifying their operations to other regions of the European Union. Separation from the EU will also deny the UK business fraternity a chance to access larger markets and expand production. This prevents them from taking advantage of the economies of large scale and makes higher profits. Enlargement of the business activities is associated with the increase inn the potential to enhance investment. This enhances economic liberalisation. Separation from the EU implies that UK will have wasted the time spent in liberalisation of the economy. The benefits accrued from enlargement of the market are more significant than the benefits gained from increased trade. Immigration Separation will also lead to the loss in the labour integration and skills exchange whereby the workers from the affiliate nations are free to move and integrate. Sharing of information among workers motivates them and promotes the application of the acquired skills in economic development of their mother countries (Drucker and Maciariello, 2008; Masso, Varblane and Vahter (2008). The tourism industry would also be negatively affected due to the loss of the tourism due to the reduction ion the number of tourist from the EU origin. Separation of the UK from the EU will enable the country to save the enormous annual net contributions they remit to the EU i.e. €9bn. This will help in the reduction of the UK deficit; however, minimal. The money saved through withholding of the contributions can be applied in the improvement of the business enterprises within the UK. The contributions of the UK to the EU amounts to 0.6% of the country’s Gross Domestic Product (GDP) (Ramsay, 2011). The funds contributed to the EU enhance the economic development of the affiliates of the EU. This implies that the separation of the United Kingdom from the EU will enable the country reinvest the funds in the improvement of their internal business environment. Politics Separating from EU will also affect the political systems of the UK. Separation will deny the country a chance to enjoy the non-economic benefits such as the political reunification of Europe (Hix, 2005). This enhances internal peace and prosperity, cooperation with other nations in solving international problems related to crime and environmental changes. According to Marcella and Baxter, (2000) the social democratic status of the UK governance system is lower compared to that of the European Union. UK tends to spend more on welfare charge additional and less tariffs as well as government subsidies countries. The supporters of the inclusion of UK in EU argue that the opportunity will enable the country continue to benefit from the centre-right nature of leadership. However, critics of UK’s association with the EU argue that the membership undermines the UK’S social and economic freedom. According to Great Britain and United States (2007), most of the supporters prefer relating politically with the United States rather than the European Union. However, those that support UK’s membership to the EU argue that the union is more profitable than dwelling on the politically-oriented relationship with the US. Other economic powers such as China and India may also take advantage of Britain’s partnership with the EU to consolidate their diplomatic and economic ties with the United States. Therefore, separation of the UK form the EU ensures that they maintaining close ties with the United States. Separation of Britain from the European Union implies that the citizens of the other countries in the EU will not be required to move freely in the United Kingdom or possess the right to work in the country. This would be disadvantageous citing the fact that the citizens of the two regions transit across territories for various reasons such as employment and business. For instance, in 2011, approximately 165 000 EU citizens migrated to the UK while about 182 000 UK citizens relocated in the EU in 2010 (Pusch and Heise, 2012). Proponents of the separation argue that such a move would improve the quality of life among the UK citizens. This is because there would be less strain on the public services and infrastructure. This is viewed to improve the business environment for the local entrepreneurs leading to an increase in the level of the business activities. However, opponents argue that the decrease in the number of immigrants decrease the market potential. This caters for the deficit that may occur in the labour market as well as enhancing the overall productivity. However, restriction of the free movement of citizens will also deny the UK the skilled workforce of the EU origin. Loss of jobs will also be experienced by the UK citizens that work in the EU countries. Conclusion The EU currently comprises of 27 nations primarily located in Europe. Separation of the UK from EU will affect the business disposition of the UK, both negatively and positively. Some of the benefits of the separation includes opening their potential to invest and relate with external countries such as the US and building trust to the investors. Although the separation will deny the country a chance to enjoy the non-economic benefits such as the political reunification of Europe, the country will be provided with an opportunity to outsource for other trade partners such as the US. However, the retaining their membership in the EU is crucial because they enjoy the reduced tariffs. Retaining its membership to the EU will enable the UK enjoy the benefits related to the high volume of imports and exports. Some of the UK exports to the EU include weapons and pharmaceutical drugs while the imports are manufactured products such as beverages and chemicals. This promotes trade and economic integration. References Biondi, A., Eeckhout, P. & Ripley, S. (2012) EU law after Lisbon, Oxford, Oxford University Press. Currie, S. (2008) Migration, work and citizenship in the enlarged European Union, Farnham, England, Ashgate Pub. Dearden, S. (1997) Should the UK join the European Union single currency? 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