This revision short looks at some of the Micro & Macro Effects of Brexit.

Microeconomic Effects

🚛 Higher Business Costs & Red Tape

→ Increased customs checks raises business costs.

→ Example: Small UK food exporters like cheese producers faced delays and extra paperwork when exporting to the EU.

→ Hits SMEs hardest, reducing competitiveness and hitting exports

🏭 Reduced Trade Variety & Supply Chain Disruption

→ Many firms have reduced or stopped EU trade due to friction.

→ Example: UK fashion retailers like ASOS and Boohoo faced increased return costs and delivery delays.

→ Disruption to just-in-time supply chains affected automotive firms like Mini (BMW) and Nissan, raising input prices.

👷 Labour Shortages in Key Sectors

→ End of free movement reduced EU worker inflow.

→ Example: UK farms reported crops rotting due to lack of seasonal workers; hospitality firms like Pret A Manger faced staff shortages.

→ Leads to rising wages and lower profits

📊 Macroeconomic Effects

📉 Lower Long-Term GDP Growth

→ Estimated 4% reduction in UK GDP over the long run

→ Driven by lower trade, investment, and productivity.

→ Fall in net inward migration from the EU but steep rise in non-EU migration despite tighter controls on work & study visas

💷 Falling Business Investment

→ Brexit uncertainty led firms to delay investment.

→ Example: Honda closed its Swindon plant (2021), citing global restructuring and Brexit-related trade concerns.

→ Reduces aggregate demand and capital deepening.

🌍 New Trade Deals & Regulatory Autonomy

→ UK has signed deals with Australia, New Zealand - but they only account for very small % of trade

→ Some sectors may benefit from flexible regulations, e.g. financial services or biotech, but gains may take years.