Impact of Brexit on exports and import on UK business

Executive Summary

Currently, the imports and exports are in danger of theoretically to be weaken of the impact of
Brexit. The study portrays and explores potential post-Brexit scenarios, as well as how they
would influence the retail industry, especially Tesco. The aim of the study is to show how other
influences, such as FDI, will affect not only the UK economy but also the retail sector. Assessing
the effect of Brexit on UK companies' export and import of goods, with Tesco's economy being
the most impacted. Brexit is known as the United Kingdom exiting the European Union in this
case.

Based on a study of numerous papers on various theories of exchange, expense, tariffs, and
social influence, it was concluded that Tesco has a small range of choices, but it must pool all of
its capital to get through the situation. Since the majority of Tesco's foods and other fast-moving
products are manufactured from EU countries, the findings suggest that tariff changes and
customs processes as a consequence of Brexit would bring stress and expense to the importation
phase.
Introduction

The word "Brexit" is widely used to apply to the United Kingdom's (UK) departure from the
European Union (EU). Brexit is a phrase that was formed by adding the terms Britain and
departure. In 2016, this nation voted to leave the European Union in a referendum that
culminated in the resignation of the Prime Minister at the time. The Pound Sterling has also
plummeted in value against other global currencies including the Euro and the US Dollar as a
consequence of this referendum (Halligan & Lyons 2017). The world has been waiting for three
years to see how Brexit will unfold, the conditions of the divorce, and the effect a definitive
departure from the Union will have on UK companies.

The influence of the Brexit vote on companies, especially in the United Kingdom, has been
somewhat different from previous economic shocks, such as the 1973 OPEC oil shock (Martill &
Staiger 2018). The difference is that because of the ambiguous terms of the UK's departure from
the EU, and also the amount of time since the referendum and the agreement on exit terms,
companies have been left in a state of confusion (Green 2017). As a consequence, companies in
the United Kingdom have grown highly sceptical regarding the likelihood of an agreement being
concluded earlier. Furthermore, the future deal's conditions have not been explicitly articulated to
the corporate community.

The UK's exit from the EU would have a variety of consequences for companies. As a
consequence of Brexit, foreign direct investment (FDI) would decline dramatically (Stojanovic,
& Tetlow 2018). The departure would also result in a drop in spending from EU countries. This
expenditure is the UK's main source of FDI at the moment (Glencross 2016). Without the Union,
the nation would be unable to control market liberalisation agendas and would lose the right to
influence EU regulations. Furthermore, the nation would lose control over the bloc's science and
industrial policy.

Power, regional study goals, and industrial growth, both of which are essential to the UK, would
be out of control. Trade policy, financial markets, and the budget are among the other sectors of
the economy that would be impacted by the withdrawal. As a result of the Brexit referendum,
manufactured products were more competitive for UK merchants, which were unable to sustain
profitability, forcing the majority of them to rethink their supply chains. Uncertainty over the
impact of Brexit on UK industries has resulted in massive employment cuts and confusion at UK
ports (Evans & Menon 2017).

Tesco

Tesco is a well-known retailer in the United Kingdom, and it is one of the companies that has
lost as a consequence of the Brexit referendum. One of the market resolutions produced by
wholesale manufacturers in the UK to offset the impact of a weakening Pound was to push on
price hikes to consumers. This shift sparked outrage among retailers around the world.

Other than a 10% price hike levied by the retailer, Tesco declined to stock Unilever products
such as Hellman's mayonnaise and Marmite. Furthermore, after Heineken raised the cost of its
drinks, Tesco ceased distributing beer in any of its convenience outlets. Tesco was selected for
this topic because it is one of the UK stores that would be negatively influenced by Brexit (Erken
et al. 2018). Furthermore, because of the retailer's reputation for declining to pay higher rates for
the listed products, customers have named Tesco as the brand that they equate with Brexit.

This subject was chosen due to the one-of-a-kind significance of the incidents that accompanied
the Brexit referendum, as well as how these events have changed business activities in the United
Kingdom. Only the Great Depression, which culminated in a stock market collapse and market
turmoil between 1929 and 1932, may be linked to Brexit (Martill & Staiger 2018). The
unparalleled confusion around the Brexit referendum, on the other side, was triggered by the
existence of unknown causes that companies are unable to measure. For example, there is
confusion regarding the details of the country's departure from the EU, the essence of the UK's
relationship with the EU, the integration mechanism, the effect of Brexit on market access, and
subsequent policy on migrant workers, consumer security, and product regulation (Grant 2016).

Discussion

Brexit is synonymous with a variety of economic expectations. A customs union is an

organisation of countries that have decided to practise free trade within themselves. Countries in
a customs union often have a standard tariff that they extend to republics that aren't members.
When the United Kingdom leaves the EU after making a deal to stay a member of the customs
union, the UK's economy would suffer (Dorling & Tomlinson 2019).
A customs union, in theory, supports member states by growing economic welfare. In the
formation of a customs union, tariff barriers are abolished, resulting in lower costs for goods
travelling between member states. As a consequence of the elimination of tariffs by other
nations, countries within a customs union will benefit from enhanced exports. According to this
hypothesis, Brexit would result in a reduction in economic welfare due to reduced productivity
and demand, as well as higher manufacturing costs.

If it is believed that the UK's export volume would fall as a result of Brexit, the nation would be
unable to enjoy the rewards of the customs union to the same degree as before. Furthermore,
UK-based firms would have a narrower demand for their items. The exit would have an effect on
sectors with high manufacturing costs because reaching economies of scale would be challenging
(Ridge-Newman, Sols, & O'Donnell 2018). Because of the decline in competition induced by
domestic protection tariffs, companies in the UK would be unable to increase their productivity
or decrease commodity prices, resulting in a lack of market surplus.

Whether or not the two countries have reached an exit trade deal would decide the essence of
trade between the government and the Union after the exit (Coles 2016). However, since they are
all WTO participants, their tariffs would be determined by their WTO commitments. The basic
strategy of WTO agreements is for member states to minimise tariffs for different industries
below a certain amount. In the WTO, the EU is regarded as a single entity as well as a distinct
customs territory. The WTO concepts of Most Favored Nation (MFN) and National Treatment
(NT) will be extended to the EU and the UK after Brexit. There are nondiscriminatory internal
and cross-border standards that shield WTO member countries from exploitation (Oliver, 2018).
With these principles in effect, the nation would be able to sell products, services, and
technologies to the EU at lower tariffs than most other non-EU nations.

As tariff restrictions are imposed on a commodity, the product's unit price rises. Price increases
have an influence on buying behaviour regardless of the influence they have on alternative
products. When rates shift, consumers check out replacement goods that are close to the initial
but less costly. Tariff barriers' effect on consumer behaviour as a result of Brexit would be
calculated by the price rise margin, the supply of alternative goods, and the price of such
substitute products.
When tariffs are imposed on UK goods, demand for such products would fall among EU
customers. Supporters of Brexit often argue that the decline of exchange volume as a result of
the withdrawal would be advantageous to the nation since the decrease in trade volume with the
EU will result in a decrease in the trade deficit (Dhingra, Machin & Overman 2017). However,
since it calculates the worth of a trading agreement dependent on a deficit, this is a deceptive
term. Since the UK would be subject to EU export duties and customs processes, the cost of
goods imported from the EU will rise. In principle, a price increase would reduce demand for
these goods. This principle, though, does not extend to all goods since certain of them pay for a
limited portion of customers' expenses, and therefore their intake may not be impacted by a price
rise.

Since the bulk of FDI inflows into the UK come from EU member states, exiting the bloc would
reduce the Kingdom's appeal to international investors. FDI into the UK as a part of the EU has
improved owing to a variety of reasons (Jablonowski et al. 2018). For instance, becoming a part
of the Community provided for free cash flow from other Union participants. Those investors
will be willing to invest in the UK without any limitations. Second, as a member of the EU, the
UK has the benefit of being a suitable export market.

For several multinationals, the country's economic climate, paired with smooth trade with the
rest of the EU, has become an appealing aspect. Third, multinationals with diverse supply chains
tend to function out of an EU country since it enables them to build up a network of branches in
the EU. Another positive for multinationals would be that the EU Single Market has similar
rules, making it simpler to manage activities and pass workers between countries (Sampson
2017). Following the departure, these factors can prompt the establishment of relations between
countries in order to encourage foreign investments in the country (Stojanovic, & Tetlow 2018).
However, since the free trade deals concerned cannot allow the same form of flow of workers,
money, and services, such agreements would fall short of the advantages of EU membership.

Changes in immigration laws was just one of the economic implications of Brexit. These
measures may become more stringent for EU nationals, or they may be intended to draw a
particular form of immigrant to the UK (Coe 2019). There is also the risk of reforms affecting
refugees from non-EU nations, which may not have been considered prior to Brexit.
While bearing the burden of Brexit on behalf of other supply chain players could be intolerable
to Tesco, the retailer must maintain its market share in the United Kingdom. Tesco has taken a
number of steps to address these challenges, reducing the possibility of losing market share to
other discount retailers in the region. The key point of worry for this retailer is a declining
currency and the subsequent shift in customer behaviour. As a consequence, Tesco would have
to make necessary improvements to its supply chain, as foreign outsourcing may become
impractical after the country exits the EU. One of the feasible choices for Tesco to explore is
buying items locally, such as cheese and butter. Consumers, as well as manufacturers, would be
impacted by a weakening currency. To adjust for shifts in the currency's value, shoppers' buying
patterns would almost definitely change. As a result, Tesco would almost certainly need to adjust
its sourcing processes to meet the demands of post-Brexit shoppers.

Tesco must compensate for both the near- and long-term effects of its departure. In the short
term, the retailer must create a network of domestic manufacturers that will act as the basis for a
policy to supply goods domestically that will otherwise be subjected to post-Brexit tariffs if
imported. Furthermore, this retailer would need to hold a significant inventory amount to prepare
for the likelihood of disruptions at the ports owing to onerous customs procedures. Tesco is now
renting refrigerated containers to boost frozen food supplies as a backup measure for a hard
Brexit. Tesco usually leases these bins throughout busy buying seasons, such as the Christmas
season, to guarantee that customers have an uninterrupted supply of products. Tesco, on the other
hand, has chosen to employ hundreds of these containers on a long-term basis.

Tesco has already loaded up on frozen and canned foods with long shelf lives in order to combat
the impact of Brexit. Fresh produce and other perishables, which are among the fast-moving
items in Tesco's shops, would not be available for stockpiling. Provided that the effects of a hard
Brexit on the wholesale price of food goods is expected to be 5% higher than it would be without
Brexit, retailers in the country must take certain measures to secure their revenues.

Impact of Brexit on UK Businesses

The UK Treasury expected immediate economic implications after the Brexit vote, such as a
global crisis. The referendum has an effect on business performance, with an expenditure pace of
2.3 percent in the first quarter of 2018 against the planned 13 percent (Nemeczek & Pitz 2017).
Despite the fact that the nation has not suffered a contraction following the vote, the economy
has been poorer than ever, with the Pound Sterling depreciating by 11% toward global currencies
such as the US Dollar and the Euro.

The UK economy has developed at a sluggish pace since 2006, amid high growth rates in other
global economies. The UK economy is 2% lower than it might have been if the Brexit
referendum had went the other direction, according to the Centre for European Reform. By the
end of 2019, this figure is projected to hit 3.4 trillion (Stojanovic,& Tetlow 2018). However,
because of the differing assumptions and approaches used, these short-term impacts vary from
long-term projections on the impact of the exit on the economy (Nunn 2017). Though short-term
estimates are focused on the next few years, long-term predictions provide insight into the UK
economy's prospects in the decades after Brexit.

Trade with the EU Member States

With a GDP of $18 trillion and a total of 508 million inhabitants, the European Economy is the
world's biggest internal economy. As a consequence, the EU economic zone enables the UK to
sell products and services. However, taxes, regulations, and customs duty may be levied on
goods sold from the UK to the EU as a consequence of Brexit. Transport prices, taxes, and a
number of non-tariff barriers all influence the price of products and services sold from the UK to
customers in other nations (MacShane 2015). When comparison to regional markets in the EU,
selling commodities over long distances is usually more costly for UK traders. Traders in the
United Kingdom would be immune to duties levied by other nations, including those in the
European Union. Specific governments' trading practises are among the non-tariff obstacles that
would impact UK merchants.

As a member of the EU, the UK was not subject to certain non-tariff barriers levied by other
members, as will be the case since Brexit. Two big non-tariff obstacles that would impact UK
merchants are customs inspections and regulatory barriers (Stojanovic, & Tetlow 2018).
Regulatory obstacles are regulatory constraints that occur between countries that have varying
laws on protection, health, and the climate. Customs inspections are conducted at any country's
entry points which include customs rules and origin paperwork (Hohlmeier and Fahrholz 2018).
Non-tariff barriers, on the other hand, can adjust based on agreements concluded between the
government and Union representatives. For eg, if the United Kingdom exits the EU Customs
Union, UK exporters would face higher costs to pay the required documentation at the border.
Foreign Direct Investment

The United Kingdom is a big beneficiary of EU FDI as well as a large participant in the bloc.
Around 42% of FDI into the nation came from other EU countries as of January 2019. This
number had declined from 48.8% in 2011. (Stojanovic, & Tetlow 2018). And before entering the
European Community, the United Kingdom had a rather flexible FDI policy. At the turn of the
century, though, the EU has been the UK's most powerful FDI partner (Peston 2017). The United
Kingdom was secured from exchange rate instabilities by using the Euro as the region's
exchanging currency.

How Tesco is affected ?

Following Brexit, the UK economy's competitiveness would be determined by the amount and
qualifications of available jobs. In order for an economy's production per individual to be
maximised, it must provide the right combination of employees with complementary skills. This
economic aspect is affected by the quality of skills possessed by citizens born in the United
Kingdom, as well as migration policies (Buckledee, 2018). This nation has a reputation for being
helpless to regulate the amount of immigration from EU countries, a perception that played a key
role in the rise of the Brexit agenda. When the UK was a part of the Union, it had no authority to
prohibit citizens from other Union countries from accessing and working in the world (Martill &
Staiger, 2018). One of the aspects that Brexit could influence economic prosperity in the UK is
the likelihood of improvements in immigration policies.

Conclusion

Following Brexit, this article explores the impact on the UK economy and the country's biggest
store, Tesco. The trading partnership between the nation and the Union is crucial to the
Kingdom's economy, according to this report. In the event of a hard Brexit, in which the nation
exits the EU without a trade deal, tariff barriers and other non-tariff barriers are likely to reduce
trade rate (Barnett 2017). However, after Brexit, the nation will still encourage refugees from the
EU bloc to join, but this would not be common with the political class. According to the new
political policy, the UK would place limits on migrants' entry to the nation or the benefits they
get. The resulting inadequate availability of labour would have an effect on national production
in that case. As a consequence, it would be impossible to defend Brexit on economic grounds.
Several analysts and researchers have attempted to determine a particular figure that can be used
to predict the economic effect of Brexit (Alexander, 2018).
References

Alexander, K., 2018. Brexit and financial services: Law and policy. Oxford: Hart
Publishing.Oxford: Hart Publishing.

Barnett, A., 2017. The lure of greatness: England's Brexit& America's Trump.London: Unbound.

Begum-Ishchy, U., 2018. Financial Impact of Brexit. SSRN Electronic Journal.

doi:10.2139/ssrn.3308398.

Bogdanor, V., 2019. Beyond Brexit: Towards a British Constitution. London: I. B.

Tauris&Company, Limited.London: I. B. Tauris& Company, Limited.

Booth, S., Howarth, C., Ruparel, R. and Swidlicki, P., 2015. What If...?: The Consequences,
Challenges & Opportunities Facing Britain Outside EU. Open Europe.

Buckledee, S., 2018. The language of Brexit: How Britain talked its way out of the European
Union. London: Bloomsbury Academic.

Cabral, N. C., Gonçalves, J. R., &Rodrigues, N. C., 2017. After Brexit: Consequences for the
European Union. Cham, Switzerland: Springer Science and Business Media: Palgrave
Macmillan.

Chang, W.W., 2018. Brexit and its economic consequences. The World Economy,
41(9),Pp.2349-2373.

Chidlow, A., 2019. The Changing Strategies of International Business: How MNEs Manage in a
Changing Commercial and Political Landscape. Springer.

Clegg, N., 2017. How to stop Brexit (and make Britain great again).London: The Bodley Head.

Coe, J., 2019. Middle England: A novel.New York: Alfred A. Knopf.

Coles, T. J., 2016. The great Brexit swindle: Why the mega-rich and free market fanatics
conspired to force Britain from the European Union.WestHoathly, W. Sussex: Clairview
Books Ltd.

Connelly, T., 2017. Brexit and Ireland: The dangers, the opportunities, and the inside story of the
Irish response. Dublin: Penguin Ireland.
Cumming, D., & Zahra, S.,2016. International Business and Entrepreneurship Implications of
Brexit: International Business Implications of Brexit. British Journal of Management. 27.
687-692. doi:10.1111/1467-8551.12192.

Dhingra, S., Machin, S., &Overman, H.,2017. Local Economic Effects of Brexit. National
Institute Economic Review. 242. R24-R36. doi:10.1177/002795011724200112.

Diamond, P.,Nedergaard, P., & Rosamond, B., 2018. The Routledge handbook of the politics of
Brexit.London; New York Routledge.

Ebell, M. and Warren, J., 2016. The long-term economic impact of leaving the EU. National
Institute Economic Review, 236(1), pp.121-138.

Erken, H., Hayat, R., Prins, C., Heijmerikx, M. and de Vreede, I., 2018. Measuring the
permanent costs of Brexit. National Institute Economic Review, 244(1), pp.R46-R55.

Evans, G., &Menon, A., 2017. Brexit and British politics.Meford, Mass.: Polity Press.

Glencross, A., 2016. Why the UK voted for Brexit: David Cameron's great
miscalculation.London: Palgrave Macmillan.

Kaufmann, E. P., 2019. WHITESHIFT: Populism, immigration, and the future of

whitemajorities. Woodstock: Overlook.

Kelly, M., 2018. Languages after Brexit: How the UK speaks to the world.Cham, Switzerland:
Palgrave Macmillan

Oliver, T., 2018. Europe's Brexit: EU perspectives on Britain's vote to leave. Newcastle upon
Tyne: Agenda Publishing Limited

O'Rourke, K. H., 2019. A short history of Brexit.London: Pelican.

Peston, R., 2017. WTF?London: Hodder & Stoughton Ltd.

Ridge-Newman, A., Solís, F. L., & O'Donnell, H., 2018. Reporting the Road to Brexit:
International media and the EU Referendum 2016.Cham: Palgrave Macmillan

Tse, H., 2017. Doing business post-Brexit. S.L: Bloomsbury Professional.

Watson, D., Yap, S., Pandi, S., husband, j., &Tekelas, F.,2018. Brexit and the Implications of
Food Safety Cultural Compliance in the Food Manufacturing Sector. Acta Scientific
Microbiology.doi:10.31080/ASMI.2018.01.0039.

Welfens, P. J. J., 2017. An accidental Brexit: New EU and transatlantic economic

perspectives.Cham, Switzerland: Palgrave Macmillan