About two weeks ago, fifty-two percent of UK voters decided to leave the European Union. The decision was a major shock, as many thought the vote would not pass. What does this vote, which is commonly referred to as the Brexit, mean for the global economy?
First, one must know the function of the European Union. Many UK voters apparently did not know this, as Google’s top hits in the UK the day after the vote were, “what is the EU?” According to the BBC, the European Union was formed after WWII and allows for free trade among member countries as if they are a single market. Additionally, people migrating from a EU country to another member country can work without a visa.
Second, what were the reasons that people voted for the UK to leave the EU? Many stated that because of the single-market economy, the EU migrants were taking away British jobs; this was a point that many used in favor of staying in the EU. Another reason that swayed voters was that the EU had difficulty fixing problems such as high-unemployment rates in member countries, leading voters to feel as if the EU was not effective when it came to solving these kinds of economic issues.
UK citizens have already felt some effects of the Brexit. Right after the vote was tallied, stock markets dropped, the value of the Pound fell, and David Cameron announced he would step down as Prime Minister of the United Kingdom effective October. As a result of the drop in the value of the Pound, travelers will find it more affordable to visit the UK, which may bring some money into the UK’s economy.
The Brexit decision has sparked a laundry list of theories about the long-term effects the Brexit. Some believe that in reaction to the large migrant population in Britain, the UK will make it harder to obtain visas and citizenship. Others speculate that inflation rates will increase—which will be good news to some investors. Analysts also predict that many UK businesses will move their headquarters to EU member countries, which would move jobs away from the UK.
These long-term effects are highly contingent upon the final agreement between the EU and the UK. While the UK still has two years left as a member country of the EU, we still have a bit of time to see the long-term effects of the referendum.