- Potential Loss of Foreign Direct Investment
- EU is known for the high cost of membership for the countries, and it was one of the main reasons for the UK’s exit from the EU. Annually EU received over 15 billion pounds from the UK just for the membership alone (Pettinger, 2019).
- Damage to the flow of Intelligence – Business & Defense
- There is a flow of information shared by the EU countries and NATO with data required for business and safety measures. BREXIT’s interference with the flow of data could potentially reduce valuable information about criminals etc.
- Shortage of skilled labor
- The limitations of the additional inflow of skilled labor from the UK EU could potentially create a shortage of skilled labor, as the majority of the EU labor market is immigrant-oriented.
- Massive Interruption in EU Debt Financing
- BREXIT influenced the EU Debt Financing, as the EU required the UK to pay off a part of debts for the loans from the European Investment Bank and the European Financial Stability Mechanism (Browne, 2020).
- The increase in the average EU Defense Costs
- Among European countries, UK’s army is ranked second after France (Warsaw Institute, 2020). Moreover, one of the biggest arms-oriented companies in the EU, British Aerospace Engineering, makes 25 billion in arms sales annually (Warsaw Institute, 2020). Now that the UK has left the EU, the profits from the sales would not contribute to the EU’s defense market.
- Disruption in Unrestricted Immigration/Open Borders
- Due to the limited flow of intelligence from the UK’s side, the EU would have to face a disruption in unrestricted immigration compared to the UK, which has closed its’ borders.
- Cancellation of cross-border trade agreements
- Cancellation of cross-border trade agreements would result in job losses and reduced exports of agri-food products for the EU counties (Barigazzi, 2018).
- Negative Impact on overall financial strength of the EU – weaker nations, i.e. Greece
- It is estimated that the financial impact from BREXIT would affect the closes countries to the UK, like Belgium and Netherlands, and those which have high trade volumes with the UK, as Germany and France. Smaller countries like Greece and Cyprus expressed concerns about BREXIT affecting tourism (Barigazzi, 2018).
- Natural Resource supply – oil & natural gas
- Ireland imports almost 90% of oil products and 93% of the gas from the UK, so the country’s energy market would be significantly affected by BREXIT (Barigazzi, 2018).
- Other hidden effects
- BREXIT could block access to British fishing areas and Exclusive Economic Zone, where other countries like France make half of their fishing activities (Barigazzi, 2018).
Which countries bear the weight/risk
In terms of trade agreements, BREXIT implies risks for both France and Germany. BREXIT would affect the export rates in Poland and Span, the tourism sphere in Greece and Cyprus, and the energy market in Ireland.
The potential impact on the MNEs based outside the EU & the UK – Import/Export
MNEs would have to attract more sources like foreign investments to increase export rates and reach the attractive destination market in the UK.
Barigazzi, J. (2018). Where Brexit will hurt most in Europe. Politico.
Oyamada, K. (2020). How does BREXIT affect production patterns of multinational enterprises? Journal of Policy Modeling, 42(1), 1-19.
Pettinger, T. (2019). Disadvantages of EU membership. Economics Help.