Evaluate the micro and macroeconomic effects of the UK leaving the EU Single Market.

One major impact of leaving the Single Market is increasing the costs of firms. The EU has a common external tariff, and given that members enjoy free trade between each other, this is likely to increase import tariffs on UK exports. This would increase the cost of UK firms when importing costs of production, for example raw materials or labour. With higher costs causing lower profits, this may cause a decrease in consumer welfare. Moreover, goods being transported across borders will have to satisfy EU regulations, which increases the time and hence the cost of transporting goods, again lowering profits for firms and affecting consumer welfare. However, the extent of this negative effect strongly depends on the negotiations between the UK and the EU. However, given May pushing for a hard Brexit, a trade deal that benefits the UK is unlikely. Also, the extent of costs rising depends on the success in negotiating trade deals with countries outside of the EU. However, trade deals take time and it might be too late given the immediate impact of leaving the EU Single market on the UK economy. A main argument for leaving the EU Single Market was that there would be more job opportunities for the UK workers once net migration from the EU decreases, hence reducing unemployment. However, unemployment is not the main problem in the UK. The UK unemployment rate has not been lower than the current one since 1980. The main problem in the UK labour market is having a shortage of skills. This requires the UK to import human capital from the EU for industries that require skillful workers such as the NHS. Hence, leaving the Single Market will cause negative distortions to the UK labour market, with job vacancies unable to be filled.