Brexit - International Management

Table of Contents

1.Introduction----------------------------------------------------------------------------------------------------------3

2.Pros and Cons of EU Membership------------------------------------------------------------------------------3

2.1 The Impact of Global Trade on Britain’s Membership-----------------------------------------4

            2.2 The Effects of Brexit on the U.S. --------------------------------------------------------------------5

3.Understanding the culture of Britain---------------------------------------------------------------------------6

           3.1 Cultural characteristics of Britain-------------------------------------------------------------------6

           3.2 Conducting Business in Britain versus the United States--------------------------------------8

          3.3 Changes in Britain's Culture after joining the EU------------------------------------------------9

        3.4 Hofstede’s framework for classifying culture----------------------------------------------------9

        3.5 Potential changes as a result of Brexit-----------------------------------------------------------10

4. Britain’s legal, political, and financial systems-------------------------------------------------------------10

        4.1 Britain’s Infrastructure-------------------------------------------------------------------------------13

        4.2 Projected changes as a result of Brexit----------------------------------------------------------13

        4.3.Britain’s corporate social responsibility---------------------------------------------------------14 5. The National Economy of Britain-----------------------------------------------------------------------------14

        5.1 How was the economy impacted when citizens voted to exit the EU--------------------15

        5.2 Long- term Economic Predictions-----------------------------------------------------------------16

6. Hotbeds of International Business----------------------------------------------------------------------------18

        6.1 Brexit’s impact on Economic Hotbeds-----------------------------------------------------------19

7. Conclusion----------------------------------------------------------------------------------------------------------20

1.Background

A referendum was held on June 23 2016 to determine whether the UK should leave or remain in the European Union (defined as a single market composed of 28 countries until Britain’s exit).  The results of the referendum were 52 to 48 in favor of leaving the EU.  The overall turnout was 71.8% percent of the total residents with more than 30 million total votes.  

2. Pros and Cons of EU Membership

Britain’s membership within the European Union has had several financial benefits as well as its fair share the consequences.  The long term ramifications of Brexit are yet determined.  However, one of the more immediate effects was the resignation of Prime Minister David Cameron.  A major topic of discussion is centered around why Britain would have an interest in leaving the EU.  This topic is currently the subject of much debate because of the many opposing views.  For the purpose of this discuss, we will refer to those in favor of the EU as “ Brexiteers “ and those opposed as “ Remainers”.  The Brexiteers say, “Britain’s links with the EU are holding back its focus on emerging markets – there is no major trade deal with China or India, for example. Leaving would allow the UK to diversify its international links.” Other critics of Brexit argued, “Britain was being held back by the EU, which they said imposed too many rules on business and charged billions of pounds a year in membership fees for little in return. They also wanted Britain to take back full control of its borders and reduce the number of people coming here to live and/or work” (Mui, June 18).  On the other hand, the Remainers claim, “44 per cent of Britain’s exports go to other EU countries. Putting up barriers with the countries that Britain trades with most would be counterproductive” (Foster, Kirkup, what-would-brexit-mean-for-british-trade, June 14, 2016, www.telegraph).

One significant benefit of EU membership is, that there are no tariffs imposed on countries when importing and exporting amongst other members of the EU. Britain’s EU membership has afforded them the opportunity to have a voice in negotiations within the EU. For example, the EU is currently in negotiations with the United States regarding the largest free trade agreement (Transatlantic Trade and Investment Partnership).  Britain’s decision to leave the EU automatically forgoes its inherent negotiation privileges.  However, assuming the individual countries would be open to such conversations, Britain would be free to negotiate their own trade agreements with individual countries.  It’s impossible that these negotiations could be more favorable to Britain seeing as how they could focus their negotiations on what is beneficial specifically to Britain without concern for the other members of the EU.  Some countries may feel more comfortable operating within the long-standing backing of the EU.  

2.1 The Impact of Global Trade on Britain’s Membership

With respects to EU trade position, the first estimate for exports of goods in May 2016 was €142.7 billion, down by 2% when compared to figures from May 2015. Imports from the rest of the world stood at €136.3 billion, which is down by 3% when compared with figures from May 2015. As a result, the EU28 recorded a €6.4 billion surplus in trade goods in May 2016, compared with +€5.8 billion in May 2015. The EU28 trade rose to €252.0 billion in May 2016, up 1% compared with May 2015 (Eurostat, News Release, May 2016).  The United Kingdom’s trade links with the EU are considerable. Official trade statistics show that the European Union is the destination of about half of all British goods exports. Given that total exports account for 30.5% of British output the value of all goods and services exports to the EU are equal to 14% of the United Kingdom overall economy. “If we include the more than 60 countries that the UK trades freely with because of the free trade agreement with the EU, the trading links are even bigger” (Capital Economics for Woodford Investment Management, February 2016). These additional agreements would then account for 63% of Britain’s exports that are linked to European Union membership.