As part of Britain’s effort to separate from the European Union, an event commonly known as Brexit, Prime Minister Theresa May recently announced the country will be leaving the EU’s single market last week.

The announcement has raised concern among experts who predict Britain’s withdrawal from the single currency market will have considerable financial consequences, even though the United Kingdom doesn’t use the euro and was never truly a part of the EU’s currency union.

Thomas Barkley, professor of finance practice at Syracuse University’s Martin J. Whitman School of Management, said the E.U.’s single market benefits its member countries with freedom of movement in goods, people and capital.

“By leaving, one of the things Britain hopes to impose is more control over their borders, so they will limit immigration and the goal there being that people will no longer be able to get into Europe and move directly to the U.K.,” Barkley said. “The main thing I think in terms of leaving the single market is to prevent that freedom of movement of people.”

British citizens who live on mainland Europe are currently allowed to claim health and welfare benefits in their countries of residence. It is unclear whether individuals will be forced to move back to their home country, including European immigrants who live in the U.K., Barkley said.

The British government has been “cagey” on what it intends to do with EU citizens, said Alan Allport, associate professor of history at the Maxwell School of Citizenship and Public Affairs. That leaves many people in limbo with questions and anxiety, he added.

Glyn Morgan, associate professor of political science at the Maxwell School, said Britain is expecting to get support from the United States during its transition away from the EU’s single market system.

“Mrs. May wants to form an alliance with (Donald) Trump,” Morgan said “They’re both appealing to protectionism. They’re both appealing to nationalism.”

Morgan said the primary issue that could stem from Brexit for the U.K. isn’t tariffs, because if Britain comes out of the single market and currency union, it will enter into the World Trade Organization. Most of the countries in the WTO have low tariff rates of around 4 or 5 percent, Morgan said.

Within manufacturing sectors, he said companies can currently locate different parts of their manufacturing processes in different countries without having to go through customs inspections. However, if non-tariff barriers are implemented in the U.K., trucks and planes will be inspected more vigorously, hurting Britain’s trading process, he added.

Japanese car companies such as Toyota and Honda also manufacture in multiple parts of the U.K., Allport said. Barriers may force these companies to move their manufacturing elsewhere.

The experts also said they have concerns that the European financial sector will likely suffer due to Brexit. Allport said London is the largest financial district within the EU, and many EU states seek financial services such as stock trading, insurance and currency exchange from London.

Barriers may hamper those services in the future, and some of the financial companies may be forced to move to other European cities, he said.

“The ideal situation would be to leave the EU while remaining within the customs union, the single market,” Allport said.

There are other countries that are not a part of the EU but have access to the single market, Allport said, but they have to join other agreements. For example, Norway is a part of the Schengen Agreement, which eliminated most of the EU.’s internal borders. Norway also pays fees to the EU.

It is likely that Britain may have to participate in such agreements or pay fees if it wants to continue having access to the single market, Allport said.

“So I’m sure whatever happens with Brexit is going to have a big impact not just upon the U.K. and not just upon Europe, but the way that people around the world think about free trade and customs unions,” Allport said.

Published on January 23, 2017 at 9:53 pm

Contact Sandhya: ssiyer@syr.edu