Potential Implications Of The Brexit For The European Union And The United Kingdom | FASTENER EURASIA MAGAZINE
Güncellendi
Operation Successful !

Thank you for choosing us

loader

Potential Implications Of The Brexit For The European Union And The United Kingdom

Dr. Esra N. KILCI, Lecturer at Istanbul Arel University, Faculty of Economics and Administrative Sciences, Department of International Trade and Finance, esra.kilci@gmail.com

1. Introduction
 
The European Union plays a very big part in making the UK an important financial and commercial centre. Nevertheless, the reasons such as the problems resulting from intensified crisis in Spain, Portugal and, particularly in Greece, the increase in the number of immigrants and the growing problem of refugees caused the important part of the UK population to take action in the direction of leaving the EU and resulted in the separation decision from the Union in the referendum held in June 2016. The European Union offers many advantages to the UK, the Common Market in particular, as it does to the other Member States. Britain is one of the most important advocates of liberalism within the Union and London is of great importance for global markets. Therefore, there is a mutual benefit and dependency between England and the EU. 
 
The Common Market feature provided by the European Union gives member countries a global perspective in terms of both regulations and competition. Free movement of the four main elements - goods, services, capital and labour -  secured by The Common Market, provides great benefits to many countries in the Union, including the UK, France and Germany. The common market phenomenon and right to the passport, which ensures free access to the countries within the Union, allows the companies to consolidate operations in a single centre, enabling the transactions to be carried out at lower costs and with simpler procedures. 
 
According to a study conducted by the LSE Centre for Economic Performance in 2015, it is estimated that the UK leaving the EU and joining the European Free Trade Zone may cause a contraction of 2.2% to 9.5% on GDP (Dhingra, Ottaviano and Sampson; 2015, p. 5). Increased volatility in exchange rates before and after the referendum, especially in the British currency, the sharp decline in capital outflows and severe value loss experienced with the retreat in demand, are developments that show that the UK’s exit is negatively priced by international investors. 
 
2. Post–Referandum Process
 
A consensus was reached to have The EU and the United Kingdom come to a mutual agreement by October 2018 on the exit from the Union and the determination of the new status of trade relations. Accordingly, in November 2018, an agreement was reached with the EU on a Brexit agreement to be implemented with the EU and it was decided to be put to vote in the UK Parliament in January 2019. Subsequently, the resulting option will be voted in the EU Parliament in March 2019. The parties are concerned about the possibility of a ‘hard Brexit’ in which Britain will withdraw from the common market and customs union with the rejection of the said agreement in the Parliament and the conclusion of negotiations without an agreement. In the case of Brexit negotiations did not end with a compromise in 2019, this would lead to an economic and financial deterioration in the UK and a long-term inflation risk. 
 
3. Predictions on the Post–Brexit Agreements to be made between the UK and the EU.
 
In the event of the realization of separation from membership, resultant new conditions of negotiations between the UK and the EU are of great importance. Based on the experience of other countries, Norway, Switzerland, Turkey experiences, or the agreements to be signed within the World Trade Organization (WTO) are within the bounds of possibility. Increase in tariffs, border controls and legal barriers in the coming period will result in increased costs for British goods entering the EU until new trade agreements are signed. The most viable option with the highest integration rates that would make a positive contribution to lowering uncertainty and transaction costs and allow the UK holding on to the existing right of access to the Common Market, seems to be the Norwegian Option, which entails becoming a member of the European Economic Area. However, Norway, which is a member of the European Economic Area and the European Free Trade Association, is obliged to abide by the EU regulations in exchange for access to the Common Market, so in this option, Britain will not have the political flexibility it desires.   
 
With the Norwegian option entering into force, in return for the right to access to the Common Market financial services the UK will allow free movement of labour, contribute to the EU budget, and at the same time,  comply with EU regulations without having a voice. In the event of non-compliance with EU regulations, the Union will be able to suspend the UK’s EEA (European Economic Area) membership. 
 
Another option is the Swiss Model, which offers fewer advantages than the Norwegian Model, where access to the Common Market is allowed by mutual negotiation on the basis of sectors, while at the same time requires regularly revising the standards to meet EU standards, otherwise, the right of access is restricted. In the Swiss Model, the UK has to comply with all the rules of the Common Market in the trade of goods, except for services. Switzerland has not made any agreements with the EU on financial services, except for the agreement made on the venue of insurance in 1989. Therefore, its access to the EU financial services is restricted. If Britain adopts the Swiss Model, it is inevitable that it will face similar restrictions, and in return for limited access, Switzerland is obliged to comply with EU regulations and legal framework in relevant areas. The UK will lose influence in matters related to the future of the Common Market and will have limited access to services, particularly where regulatory barriers are evident. 
 
In addition, developing trade relations within the frame of rules of the World Trade Organization or an agreement similar to the customs union agreement with Turkey, are other options. According to the Customs Union Agreement Turkey, outside services and agricultural products, can access to the common market on the goods; tariffs are determined by the EU without any initiative of Turkey and at the same time, Turkey has to comply with the preferential agreements between the EU and other countries. Otherwise, it will be subject to heavy sanctions. In view of this situation, making such an agreement for the UK is not seen as meaningful. 
 
In commercial agreements to be made under the World Trade Organization, there is no obligation to comply with EU regulations. For example, in imports, foreign customs tariffs of 10.5% on produce, 15.7% on meat, 6.5% on textile products and 4.3% on transportation vehicles, as well as important non-tariff barriers will be faced. (WTO; 2017. p. 82). At the same time, exports of goods produced in the UK, for example, the automotive industry which has a sizeable weight in exports to EU countries, may suffer greatly due to the tariffs and the barriers outside of tariffs.
 
As another option, the UK, by making an agreement for free trade with the EU will be able to avoid tariffs in its trade with the EU countries, and also, in contrast to the Customs Union, to implement its own policies in the trade with non-EU countries. The element bear consequences against the UK here is the requirement to comply with a number of mutual regulations in areas such as UK’s product standards, technical standards, labour market, health, security and competition policies, and the expansion of the scope of regulations as the scope of the trade agreement increases. A UK-specific model to increase the UK’s controlling power or an agreement similar to the Canadian free trade agreement is also within the bounds of possibilities. However, it is anticipated that an agreement benefiting the UK would not be favoured so that Britain’s departure from EU membership does not create a motivation to leave in other EU countries.   
 
4. What are the Advantages of the European Union and the Common Market for the UK?
 
Among the advantages, the Common Market provides are passport rights, scale economies, common regulatory framework, free movement of labour. The fact that companies are positioned in one place and conduct their activities across the EU reduces both costs and complexity. Another greatly contributing factor to the reduction of complexity and costs is the common regulatory framework. Instead of dealing with unfamiliar and unknown regulations, doing business within the framework of common EU regulations provides confidence and clarity. The free movement of the workforce provides easy access to the skilled workforce without the need for visa and work permit while improving performance and minimizing costs. A large part of the private equity and venture capital firms in the UK benefit from the European Investment Bank Funds effectively (EIF, p. 1) and may be interrupted after the Brexit.  
 
Any corporate company operating in any of the member states of the European Union may operate by opening a branch in other countries within the Union without further approval. The right of passport in question, called the free access right, works in two directions. A significant portion of UK resident companies who use this right of entry are the branches of banks, investment companies and management firms of European Union countries that benefit from the advantages of the Common Market to do business in the UK. Almost one third of all overseas banks operating in the UK have general directorates in other European Union countries. In the event that Britain leaves EU membership, these companies will lose their automatic passport rights. Given the high volume of the passports and the fact that the most active beneficiaries of free access are companies reside in the UK, the extent of the uncertainty and chaos that the Brexit process will cause for these companies is understood.
 
London is the financial and capital centre of Europe, which results in making a significant contribution to the UK economy. If the Brexit process is finalized to the detriment of the UK, it is expected that the companies operating in London will shift their investments and resources to other countries such as France and Germany, which will greatly harm the British economy. At the same time, incurring the loss in drug production and financial service sectors, which has a high weight in the commercial balance, will also adversely affect the UK economy. 
 
The integration between the capital markets of the UK and the European Union is very high and this leads to high volume in investments. Inherently, a significant part of direct investments in the UK is from the EU. The common market phenomenon makes it possible for many firms to conduct their operations in the Euro-Region from the UK and to enter from a single point in the other 27 countries within the Union. The common market and the right to free access contribute greatly to increasing the liquidity, at the same time ensuring efficiency in risk and capital management by allowing companies to collect their activities in one center, allowing transactions to be carried out with lower costs and simplified procedures.  As  a result of the free movement of the labour within the Union, a very large workforce network has been established according to performance and qualifications without the need for standard visa procedures and work permits. Hence, another distress caused by UK’s departure from the European Union is the long-term uncertainty in the case of European citizens residing and working in the UK and of British citizens residing and working in European countries.
 
5. What are the Economic and Political Factors Affected by the Brexit Process?
 
With the completion of the process, the course of this separation process will have a great uncertainty for both the UK and other EU countries as the UK will be the first country to leave the EU. The upcoming period of the separation of membership and the new framework of the UK-EU relations taking a shape is expected to be long as it is a highly detailed process. The studies suggest that the Brexit process will reduce the UK GDP in the short term (2020) by the range of -1.3% and -5.5% and in the long term (2030) -1.2% and -7.5%. In per capita income, a loss between -£600 and -£5,200 is estimated (Jackson, Akhtar and Mix; 2016, p. 9). 
 
Multinational companies that position the UK as the EU Headquarter, are having increased concerns over uncertainty on the commercial and economic agreements, and legal and regulatory frameworks. Moreover, the fact that Scotland and Northern Ireland who acted in the referendum prominently to stay, are moving in the direction of leaving the United Kingdom creates significant uncertainty about the future of Britain’s political unity (Jackson, Akhtar and Mix; 2016, p. 2). In addition, countries such as Ireland, Malta, Cyprus, Luxembourg, Belgium and the Netherlands are expected to be heavily affected by Brexit along with the countries with strong commercial and financial ties to the UK (Cadman, 2016). 
 
England has very important soft power and hard power elements. The soft power phenomenon used by Joseph Nye in the literature for the first time in 1990 is the ability of a country to influence and change the behaviour of other countries through elements such as culture, political values and diplomacy without any sanction or payment. Britain, which has a great dominance in terms of soft power, leaving the EU will reduce the soft power assets of the European Union and harm its effectiveness in the international arena. The UK also has strong hard power elements such as military power, financial power and foreign policy effectiveness, and the EU benefits from the strong position of the UK in international institutions such as G8, G20, IMF, World Bank, OECD, UNSC. As a result of its superiorities in the mentioned elements, UK also strengthens the EU while implementing certain sanctions in the financial sector (Global Counsel; 2015, p. 25).  
 
5.1 Evaluation of Brexit in terms of Trade, Production and Investment Balance
 
The Common Market provides advantages to the UK beyond free trade agreements. Having common technical standards and regulatory requirements in place makes free movement of goods possible between the UK and the member states without facing any obstacles. European Union countries have an important place in the UK’s exports of goods and services ve When the calculation includes trading in goods and services with the countries such as South Africa, Switzerland and Turkey which EU has free-trade agreements already in place with the volume of trade is further increased. Hence, seems to be there are many advantages for England.
 
The high trade volume between the UK and the EU also means high volume of investment and high resource transfer between economies. Given the fact that a significant proportion of direct investments in the UK are coming from EU countries, the loss or limitation of access to the Common Market will harm the UK economy. However, the declining importance of Europe in the global economy, the decrease in production and the global downward movement in tariffs slightly improves the picture in terms of the export of the UK. 
 
In case of departure, for the UK, all bilateral agreements by the EU with other countries will be void. Currently, the EU has free trade agreements with many countries, which provide benefits to the Member States from various angles. Re-agreements with these countries will take time and UK will have less bargaining power on its own, compared to the period when it was acting together with the EU. For many countries, a free trade agreement with the UK will not be as important as making a deal with the EU, when it comes to the size of the market. For example, China’s exports to Europe are almost seven times higher than exports to the UK (Springford, Tiford and Whyte; 2014, p. 34). 
 
According opinion that support Brexit, EU membership limits the UK’s trade with non-EU countries in two terms. The first constraint is the tariffs that are imposed on imports from non-EU countries that make imports from these countries more expensive than that of the EU countries. The second one emerges as result of EU’s effort to increase the volume on trade by removing non-tariff barriers within the union. Both constraints are forcing UK to make imports from high-cost producers rather than low-cost producers outside the EU. 
 
Together with the UK, Europe’s GDP becomes larger than the economies of other major countries such as the US and China. Britain has a share of 9.6% of the total trade in EU countries, and the UK makes 49% of its total exports to other EU countries (EuroStat Statistics, 2017). The realization of the possibility of making trade agreements after Brexit that will not cause any distress for the parties will prevent the destructive consequences for the countries’ economies. 
 
On the other hand, in the case of the UK’s withdrawal from the Common Market and making free trade agreements, the exporters will be faced with non-tariff barriers such as some additional costs and quotas, that will be brought by customs procedures and compliance with EU standards. With the worst case scenario that the UK is faced with problems with free trade agreements with the EU, the tariffs applied by the EU to non-Union countries will be valid on the export of the UK. In the recent years, as result of the rapid growth experienced in the international trade and the actions that are taken toward reduction of barriers, despite the decline in tariffs throughout the world, in accordance with most-favoured-nation-tariff the overall tariff is still only 4% and it is expected to be valid also for the UK,  (WTO; 2016). 
 
The EU’s trade agreements with other countries will be the decisive factor on how the departure of the UK from membership will affect the balance of production and trade. The EU has already a wide range of trade agreements, both bilateral and regional. At the same time, negotiations are underway regarding a trade agreement with the US, Japan, Canada and China as part of the Transatlantic Trade and Investment Partnership (TTIP) and similar agreements. In the meantime, the UK has been a very strong supporter of the TTIP and the free trade agreement with China (Global Counsel; 2015, p. 22).  
 
5.2 Brexit and Progression of Direct Investments
 
The UK has the highest volume of direct investments among EU countries. Most of the direct investments are from the EU and the US. The share of direct investments to the UK from EU countries has increased notably over the years since 1973, when EU membership began, especially in spite of the decline due to the European debt crisis. In the UK direct investment stocks, EU has the share of 45%, US 27% and other countries 28% (Webb and Ward; 2017, p. 2). Factors such as the UK being a highly open economy, the presence of political stability, the ease of starting a business for foreign investors, the depth of capital markets, and English being a common language are significantly increasing the investment feasibility of the UK. 
 
EU membership makes a positive contribution to the UK’s direct investment capacity. Countries outside the Union see Britain as a direct channel to distribute its products without being impeded by obstacles. The factors determining the high direct investment volume are market size and EU membership. Most of the direct investments have been realized in the services sector in the past decade, which corresponds to 60% of all direct investments, and almost half of these investments were carried out in the banking sector (Springford, Tiford and Whyte; 2014, p. 26,27). 
 
The departure of the UK from membership would result in a decrease in foreign trade volume and a decrease in direct investments, which, at the end of the day, would lead to a decrease in national income and the productivity of the workforce in the country would be harmed. Considering that multinational companies operating in the UK bring new technologies and management practices and have an impact on the production capacity (Dhingra et al., P. 3), the reduction in direct investments caused by the Brexit process will have negative consequences in terms of these advantages and therefore may lead to a reduction in production efficiency. 
 
In particular, capital-intensive sectors, such as the manufacturing sector, will be in a more fragile position due to the lower mobility of the workforce compared to machinery. Especially the industries such as the automotive sector or computer software industry, where foreign companies have a significant weight, will be adversely affected by the separation process. Finally, an important part of the European headquarters in non-EU countries is located in the UK. Given the role of tax relief presented within the framework of EU regulations, after the Brexit UK will need to negotiate third-country agreements or negotiate new tax agreements with member countries. 
 
5.3  Evaluation of Brexit in terms of Financial Services
 
Financial services are expected to suffer the most from the Brexit process. Considering the common market receives London’s largest share of direct investment inflows from the financial services sector, it is estimated that the UK’s superiority will be harmed, even in the best case scenario where the right to free access to the Common Market is maintained. With the loss of UK’s right to free access to Common Market, the status quo, where, for instance,  a financial establishment that operates in the UK without a branch of an investment company in France, or an investment company in France operating in the UK without opening a branch, or ability of a bank headquartered in the USA to trade financial services with the Union countries without opening a branch in the UK will be imperiled. 

 
Allthough the financial income in the pre-crisis period was an important source of tax for the British Treasury, it was reacted against by the taxpayers in the post-crisis period in the face of the restructuring of the capital of banks experiencing financial stress. The UK’s willingness to take initiative in terms of financial regulations seems rational, but the degree of openness to other countries will be reduced, unless it complies with EU regulations. Another negative development can be experienced as follows; The UK may allow EU countries’ banks to open branches in London, and may adopt the EU member states’ laws and regulations as equal. However, banks outside the EU will no longer be able to open a subsidiary in London; but will be able to open branches in other EU Member States. Because in order to benefit from the banking passport right and open branches in other countries, a non-EU bank has to open a branch in one of the EU member states. So it will have to continue its activities in EU member states by opening a branch in Paris or Frankfurt; be obliged to comply with the regulatory and supervisory mechanisms of the main country, the UK and the EU. Banks, which do not want to bear the increasing costs due to the fulfillment of the requirements of three different supervisory regimes, shall transfer their activities and resources to the EU countries. 
 
The United Kingdom can enjoy the advantages of its current status by remaining in the European Economic Area and retaining access to the Common Market. However, it will be obliged to comply with all the regulations and sanctions of the European Union; but, as it leaves the Union, it will lose its effectiveness on the decision making process. For example, it is seen that the UK played a big role on stopping the European Central Bank’s decision to swap contracts in Euro for the clearing of Euro-Zone contracts and the imposition of tax on financial transactions. Such an initiative of The ECB (European Central Bank) has taken to the European Court by the United Kingdom on the grounds that it would violate the rules of the Common Market. But, in case of separation, there will be no initiative, so swap institutions that mediate transactions in Euro will be able to move to EU countries. Although Paris, Frankfurt, Amsterdam and Dublin will be positively affected by this process, it will take a time-consuming and costly period to establish the ecosystem that London has. If it does not stay in the European Economic Area, it may face considerable obstacles while providing financial services to the EU and financial service exports may be interrupted. At the same time, the UK’s financial services transactions with non-EU countries will also suffer from the separation process. The UK’s role as a financial centre and in particular its appeal in the areas of consulting, accounting and law will be reduced. From the foreign investors’ point of view which operate in these sectors, the EU membership of the UK is of great importance. 
 
5.4 Costs of EU Regulations for Britain and Possible Impacts of Brexit
 
The UK’s foreign trade policy, i.e. its commercial relations with countries outside the EU, is managed by the European Commission. Therefore, the UK’s policies on commerce, migrants, international finance and regulatory legislation are, although partly, negotiated with other member states, and EU policies have both positive and negative effects on the UK (Springford, Tiford, & Whyte, 2014, p. 17). The economic objective of the EU is the development of integration between the member states and for this purpose, since there are no tariffs in trade between the EU member states, the EU has made common arrangements to ensure minimization of the non-tariff barriers arising from the national regulations of 28 different countries. As a result of these regulations, for example, a product produced in Italy can be subject of trade in all member states without having to comply with the standards of 28 different countries. 
 
One of the major factors considered to be influent in the Brexit process is the regulations brought by EU legislation and the extreme bureaucracy.1 According to the advocates of the Brexit, with the common market phenomenon becomes official in 1992 the financial services sector in the UK was subject to many regulations of strict rules with political purposes and were sometimes considered unnecessary. “The instructions for working hours and employees” is an example of these regulations, and it is estimated that the cost of these regulations, which are quite numerous, to the UK economy is over £ 33 billion a year in 2014 prices (Open Europe; 2015). Leaving the EU would allow the UK to develop a more competitive regulatory framework. European Union regulations make the UK economy extremely bureaucratic and at the same time narrows the field of action to penetrate rapidly growing economies outside Europe. Therefore, the departure from membership could alleviate the pressure of regulations on trade relations and enable free trade agreements with countries with high growth potential outside Europe. 
 
However, in order to continue to export to the Common Market, it is obligatory to comply with many of these regulations. Following the completion of the agreed option on Brexit process, in other words, the Norwegian model, Swiss model or the options, such as the customs union model applied to Turkey, will determine the level of compliance with regulations. Although 15% of the exports to the EU are obliged to comply with the regulations, the level of this obligation seems to be lowered for the remainder. For example, in the Norwegian Model, almost 10% of EU regulations are obliged to be obeyed (Kleveland; 2015). Moreover, the opinions that support the departure from membership under the influence of the thought that the extreme regulations brought by EU regulations have resulted in a negative effect on the UK, do not take into account a point. The UK, especially with the crisis experienced in Europe, began to make much more severe regulations compared to other countries in the financial field. Also, according to OECD data, the United Kingdom is the second country to be the least regulated in terms of production after the Netherlands. For example, according to the OECD labour market protection index, the UK is subject to the much lower level of labour market regulation than the countries of continental Europe and to the same level as the United States, Canada and Australia. Therefore, to claim that EU labour legislation and regulations reduce the flexibility of the labour market in England would not be accurate (Springford, Tiford and Whyte; 2014; p. 11). 
 
Without EU membership, UK also will lose the right to intervene in financial regulations. The UK currently has the power and initiative to veto and shape the many regulations and directives proposed by European Commission by addressing it to the European Parliament and the Commission. It also acts in partnership with countries with a more liberal approach, such as Ireland and the Netherlands. If it falls outside the European Economic Area, will no more be able to take the initiative in the regulations, as it did in the past, and also will lose the chance to take the attempts, for example, the shift of the ECB’s swap agencies to the Euro-Zone, which carry out transactions in Euro to the Supreme Court of Europe. The downside on the EU’s part is that losing an effective, liberal member with the ability to change the balance of power in the European Commission will cause the possible rise of non-liberal practices. (Global Counsel; 2015, p. 4).
 
5.5 Evaluation of Brexit in terms of Public Finance
 
The most quantifiable measure of the net monetary provision of the advantages of leaving the EU is the financial contribution payments to the EU, which also are considered to be the provision of unlimited access to the Common Market. In addition to the amount calculated based on the size of its economy, the United Kingdom pays its share of the total value-added tax to the EU. The British government will save £ 10bn annually, according to the views of those who advocate Britain’s departure from the Union. The UK’s departure from membership is predicted to reduce its net contribution to the EU budget, which corresponds to 0.5% of the country’s annual GDP in the 2014-20 period. The British Government may increase the incomes of consumers by reducing the tariffs and quotas in imported agricultural products. According to OECD data, for example, in 2012, EU tariffs and quotas increased agricultural product prices by 18.6 per cent (Springford, Tiford and Whyte; 2014, p. 84). 
 
However, there are also costs to be incurred in the case of the UK’s relations with the EU within the framework of Swiss or Norwegian options. For example, according to the Norwegian Option, it will contribute to the EU budget, although it is separated from the Common Agricultural Policy in order to be included in the European Economic Area. It will continue to support the economic development of Eastern European Countries, which are called A8 Countries, in particular, with low income levels (development funds, infrastructure investments, R & D and educational projects). In fact, contributions to the EU budget have both positive and negative economic impacts; to begin with a positive point of view, the funds provided by the EU to support economic development are used to promote growth in less developed regions, such as Northern Ireland and Wales of the United Kingdom. The UK is perhaps the country that receives the greatest support in research funding. Given that the researchers and scientists in the United Kingdom have been largely supported by the EU Research and Development Funds, the withdrawal from the Union could be expected to disrupt these funds and damage the country’s work in the field of science. (Russel International Excellence Group; 2013).
 
On the other hand, the exit from the EU will bring about the UK’s separation from the structural funds (38%) and the Common Agricultural Policy (38%) (Brown et al., 2016, p. 2), which account for almost 80% of the EU’s budget. It will contribute greatly to the reduction of the negative impact of tariffs and incentives that raise costs for British consumers. And at this point, it would be an additional cost to the budget of the British Government’s filling the gap that would arise as a result of the abolition of agricultural incentives and regional development funds in the regions benefiting from the EU budget, such as Northern Ireland and Wales. Northern Ireland, Scotland and Wales are much more dependent on agricultural support and structural funds provided by the EU than the UK, and UK withdrawal from such policies will give the greatest loss to Wales and Northern Ireland (Bell; 2017, p. 8). On the European Union side, the Union will lose one of the major financier countries, in other words, the budget revenues will decrease in proportion to the share of the UK. In addition, the UK is a country that opposes high expenditures during budget negotiations and places emphasis on budget discipline, and if the UK leaves the membership, budget expenditures may increase. 
 
5.6 Brexit and Migration Issue
 
The contribution of EU membership to the UK labor market and the economic impacts of migrations are an important issue to focus on. With the inclusion of Eastern European countries in the Union, net migration from EU to England has increased steadily over the years since 2004 and especially from 2012. (Pompova; p. 1). In the early 2000s, before East European countries entered the EU, EU-based migrations had a small share in the increase of the UK population, whereas in the following years, net migrations from the EU constituted a significant part of the total inflows. In spite of the increase in the overall economic output, the average British citizen can suffer economic damage as a result of migrants pulling down the British wages and raising the ratio of national labour force.
 
In order for Britain to continue the right to free access to the Common Market, the free movement of labour seems to be necessary. However, one of the important arguments to achieve no result in the Brexit referendum is concerns about migrants.
 
First of all, migration from Western Europe is thought to have positive effects on the British economy. These migrations contribute to the increase of qualified labour force and production, as well as the economic growth in the long term. Highly qualified workforce leads to increased productivity by using technical knowledge and expertise. Free movement allows companies in the UK to access to the skilled workforce with expertise which is increasingly important for high value-added industries. Therefore, migrations that played a negative role in the referendum was the ones from the A8 countries, not from Western Europe. While Western European immigrants are qualified to work in areas such as engineering, medicine, technology and finance that pay high salaries the workforce comes from the A8 countries are employed in low quality and low salary construction, production and service sectors. Especially the migration from Eastern Europe and the idea that these migrations lead to a decrease in the demand for low-qualified national labour force and a downward movement in salaries have played an important role in resulting in exit from the EU. The fact that housing demand causes upward movements in housing demand is another source of concern for migrants. 
 
The UK can move towards a new regulation based on a number of criteria and skills in labour migration, and so the reception of skilled labour migration can have positive consequences for the UK economy. It may also regulate labour movement through mutual agreements with Western European countries. The studies show that migration sourcing from EU will increase the productivity in the long term by increasing productivity and dependence on immigrants will increase due to the ageing population. 
 
Conclusion
 
After the Brexit, there is a great deal of uncertainty about the status of both UK-based EU citizens and British citizens living in other EU countries. The high economic integration between the UK and the EU brings along labour integration. EU offers jobs with high income and good conditions in various areas for the British who, in particular, lives in Spain, Germany and France. The EU’s broad labour market offers opportunities especially for skilled and highly equipped British in countries with an insufficient supply of labour force to contribute to the increase in income. Finally, with the departure of the UK and the tightening of immigration controls, access to British universities for publicly funded students by taking advantage of programs such as Erasmus etc. will become more difficult. (Global Counsel; 2015, p. 17).

UK’s Fastener Industry

Fasteners are important components in many products and structures. The fastener sector may have contracted dramatically over the last 30 years, but remains a major contributor to UK’s economy.
 
Fastener manufacturers from the UK produce almost 100,000 tonnes of different products each year, for use throughout industry; from aerospace and advanced engineering, to the construction of homes, schools, and many other buildings.
 
 UK manufacturers typically target niche high-value segments, such as the aerospace and automotive sectors. The domestic industry is small compared with the global market, which is estimated to be worth over £50 billion. The largest UK companies are subsidiaries of foreign-owned global companies.The industry has expanded at a steady pace over the past five years. 

Top 20 Supplying markets for fasteners with hs code 7318 imported by United Kingdom in 2017

Top 20 importing markets for fasteners with hs code 7318 exported by United Kingdom in 2017