The Political Economy Review 2017

who felt that Brexit put UK counterparts in a “very awkward position” with the potential to “compromise the project” and decided that the UK team were to be excluded from the consortium because of “Brexit and all the incertitude it brings”. The consortium was being funded under the European Commission’s €79 billion Horizon 2020 funding programme, running from 2014-2020, and which is designed to fund world class European science projects 5 . Scientists are campaigning for the government to underwrite funding for researchers denied access to the Horizon 2020 programme to ensure ERC grant holders, our brightest and best researchers, do not look to transfer their grants elsewhere. For now, however, EU funding is assured until March 2019 when the UK is expected to formally leave the EU. Until then, it would seem, it is heads down and business as usual.



The long-run effects of Brexit on the UK economy

In the referendum held on June 23rd 2016, the United Kingdom voted to leave the European Union by a margin of 51.9 percent to 48.1 percent. Hours after the results had been released, the value of sterling collapsed from $1.50 to $1.33. The customs union between EU members means that all tariff barriers have been removed within the EU, allowing for free trade in goods and services. This means that being part of the EU has reduced trade costs between the UK and other parts of Europe. Furthermore, due to the single market within Europe, non-tariff barriers have been reduced. These types of economic barriers raise the cost of trade and consist of border controls, quotas, embargos and other restrictions that are used to restrict imports or exports of goods or services. As a result of these reductions in trade barriers, trade between the UK and the EU has increased significantly between 1973 and 2015. However, the higher trade benefits are likely to be lost when the UK leaves the European Union. Firstly, if the UK decides to leave the EU, trade barriers are likely to be implemented between the UK and EU countries. Both the volume of imports and exports are likely to be reduced and so consumers’ access to goods and services is likely to fall as output decreases and average prices are likely to rise within the economy due to a fall in the supply of all goods and services within the UK. These trade costs are likely to be larger if the UK leaves the single market and decides to trade under World Trade Organisation (WTO) rules which is portrayed as 'hard’ Brexit. In the 'hard’ Brexit scenario, we assume that trade between the United Kingdom and the European Union will be governed by WTO rules and so tariffs will be imposed on trade between the UK and the EU. The increase in trade costs will come from higher tariffs on imports and high non-tariff barriers to trade. In contrast, the 'soft’ Brexit scenario suggests that the increase in trade costs is much smaller and so the UK's volume of trade in goods and services will be reduced a smaller amount. In conclusion, the overall net cost to the UK will depend crucially on the final trading arrangements with Europe. So-called 'soft’ Brexit will have a lower cost than the potential 'hard’ Brexit as it will mean the United Kingdom will remain closely integrated with the European single market (similar to Norway). As Norway is a member of the European single market, it has accepted policies and regulations implemented to reduce non-

5 Paul Crowther, Head of Physics & Astronomy at University of Sheffield interviewed for Nature, August 2016


Made with FlippingBook Annual report