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A Not-So-Average Day in Economics: June 23, 2016—The Brexit Referendum shakes the EU to Its Core

Seven years ago, on June 23rd, the United Kingdom, an economic and political powerhouse, made a historic and bold decision to leave the European Union. The decision sent shockwaves all throughout Europe and through UK’s major trading partners. Those who advocated to “exit” the EU claim that leaving the bloc would foster growth and reclaim sovereignty, freeing the UK from the limiting regulations imposed by the EU. Their chief complaint was immigration, especially in light of the terrorist attacks in other parts of Europe that would make the UK more vulnerable. Those advocating to “remain” assert that, because the UK has been integrated with the rest of the EU countries so deeply and for so long, the UK would find itself losing out on trade, investments, labor needs, and access to financial markets

It has been seven years since the referendum was signed, so I’ve been wondering: Do the British feel the same way, or are they suffering the unfortunate case of buyer’s remorse?

The UK is the biggest contributor to trade in the EU both in terms of imports and exports. One of the largest drawbacks from Brexit is the increased red tape and bureaucracy from the new processes, many of which had to be put in place upon leaving the EU. Think about increased forms needing to be filled out and the lengthier approval process. As such, while most countries have seen their economies suffer huge setbacks during the pandemic, the rest of the G7 countries (the countries with the deepest pockets) have recovered much more quickly, with the UK lagging behind.

Moreover, investments have been slow to come by since the referendum due to the uncertainty with the economy. In fact, investments have fallen by 19% compared to the projected investments before the referendum was signed. Compared to the rest of the EU nations, the UK is once again lagging behind and signals to the rest of the world that it has become a less attractive and less efficient option to invest in. With investor confidence fairly low, that is not a good look for the UK.

One of the major factors that drove Brexit was immigration and the free movement of labor between the UK and the EU. With Brexit, the UK imposed a points-based immigration system that has reduced the number of workers by 330,000, with certain sectors such as transportation, hospitality, and retail suffering the most losses. How does this labor shortage impact the economy? Employers have no other choice but to raise wages or automate certain processes, which lead to higher costs and higher prices. Couple that with reduced production, and we get inflation, or ever-increasing prices of goods and services.

Many UK citizens now believe that the UK should rejoin the EU and exit Brexit. Talk about turning the tables

So, what do the British think about Brexit seven years after that fateful day the Brexit referendum was signed? Only 32% of people now believe that Brexit was the right choice versus 52% from seven years ago. I wonder what the Brits will say if we took it to another vote: Was Brexit a smashing success, or was it absolute rubbish? I guess only time will tell…


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