IndexIntroductionEconomic integration between the EU-27 plus EEA and the United KingdomPossible patterns of economic relations between the United Kingdom and the EU-27 plus EEA after BrexitTheoretical opportunities and threats posed by the BrexitIntroductionOn 23 June 2016, with the referendum, the people of the United Kingdom voted in favor of leaving the European Union. This action was intended to interfere with the political, economic and social landscape of the United Kingdom and the whole of Europe. Therefore, the financial services sector also had to undergo a transformation amidst all this interference. (Wymeersch, 2018). Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay The financial services sector is a crucial component of any country's economy. Both locally and internationally, Brexit has re-adapted the financial services industry. Since the economic and political landscape is the most affected, economic and political experts had to intervene to analyze the situation, providing suggestions and projections in different sectors. For example, experts had predicted that the Brexit process would not be concluded before 2020. Although the possible consequences have been taken into account, the actual impact of Brexit both locally and internationally is not clear to everyone. Theoretical and research-based conclusions have been drawn about the economic effects that may occur due to Brexit (Gros, 2016). This project analyzes the potential impact of Brexit on the financial services sector (banking and insurance) in the UK and internationally. Economic integration between the EU-27 plus the EEA and the United Kingdom The type of economic integration that exists between the European Union and the United Kingdom United Kingdom and between the European Economic Area and the United Kingdom are the result of the association of countries with a preferential common commercial area. (Giacomo, 2016). With trade as the conventional driving force for all affected member countries, the economies of these countries integrated and their financial services became interconnected with each other. European integration was, therefore, a process that involved the combination of the industrial, political, legal, social, cultural and above all economic sectors of the European countries involved. (Giacomo, 2016). The European Union, therefore, created policies that touched on all of these factors. After World War II, many democratic European countries felt the need to unite and find a new life after being devastated, and nationalism had begun to emerge. (Busch and Mathews, 2016). Theories that explain economic integration are the result of the need to maintain peace and avoid wars between nation states. The banking and insurance sectors have had a lot to do to provide financial stability to the affected population, leading to progress and investment in financial services in the UK. The first theory of European integration is neo-functionalism. It was developed in 1958 by Ernst B. Haas. In this case, the use of the pioneering European experience of integration was made to generate a model which was subsequently used to test other factors. (Giacomo, 2016). Neofunctionalism theory combined three elements to explain how economic integration occurred. First, there was the growing independence of economies between nations. This realization led to the idea that the union of many independent economies would over time lead to more and better economic progress towards an economic union. In this way, financial services could be enjoyed by a wider market both locally and internationally. Secondly, there wasthe possibility of efficiently organizing countries in Europe with the aim of resolving disputes and building international legal regimes. (James, 2016). This possibility was logical for a considerable number of states, especially after the war had left their countries' economies on the brink of collapse. Therefore, countries were trying to revive their economic status, and the theory of forming allies and coalitions during war could simply be replicated in reviving declining economies. In the meantime, the recovery of economies required some advanced financial services. (James, 2016). Third, national regulatory policies could be replaced by supranational market organizations. (James, 2016). Exchanging ideas between states and developing a more powerful regulatory system for economies could help European countries create a better economic environment among themselves, thus paving the way for better business activities, especially in the financial sector. Intergovernmentalism is the second theory behind economic integration. Alan Milward, an intergovernmental writer, has argued that the national legislatures of the member states were the essential actors during the period since the European merger, and instead of being debilitated by it as some of their power was given to the EU, they ended up strengthened by the procedure and also by the individual strength of the financial services of each State. (James, 2016). This is because in some policy areas it is in the interests of member states to pool sovereignty. Intergovernmentalists argue that they can clarify times of radical change in the EU, such as when the interests of member state governments come together and have shared goals, and times of slower union, such as when administrations' inclinations wander and fail to agree. (James, 2016). They insistently highlight the role of national governments and bargaining between them in the mixing procedure. Liberal intergovernmentalism is an improvement on the intergovernmental hypothesis of European incorporation, formulated by Andrew Moravcsik in his 1998 book "The Decision for Europe". In the 1990s it was the overwhelming hypothesis of European reconciliation. Like intergovernmentalism, liberal intergovernmentalism accentuates national governments as important characters on screen during their time in the settlement. Be that as it may, it also merges the liberal model of bias agreement, whereby national governments have a clear idea of ​​what their biases are in banking and insurance and seek them out in bargaining with other states. states is vital in the pursuit of reconciliation, and bundled agreements and collateral installments involving insurance and banks also occur in the settlement process. (James, 2016). They see institutions, especially financial foundations, as a method of carrying out credible tasks for partial governments, that is, as a method of ensuring that the different governments they manage stick to their side of the bargain. Liberal intergovernmentalists considered supranational institutions of limited importance in the integration process, unlike neofunctionalists. (James, 2016). Multi-level governance (MLG) is a much more recent theory of European integration. MLG argues that policy-making and inclusion in the EU are too complicated to be explained by static integration theories. This could be a possible contributing factor to Brexit. Lead authors Liesbet Hooghe and Gary Marks defined MLG as the dispersion of authority across multiple levels of political and financial governance. That is, they claim that in theOver the past fifty years, power and sovereignty have shifted from national governments in Europe, not only to the supranational level with the EU, but also to subnational levels such as regional assemblies and local authorities. (James, 2016). They view decision-making in the EU as uneven and changing as often as possible and, in this capacity, highlight the restrictions of different European coordination hypotheses that overlook the enormous quantities of different actors from the most significant part of the distinctive levels of administration in Europe. (James, 2016). This type of fluctuation does not substantially improve UK financial services and facilitated Brexit. Possible patterns of economic relations between the UK and the EU-27 plus the EEA after Brexit Economic relations between the UK and other countries European countries stopped being simple after Brexit. The complexity of the issues that emerged after Brexit has led economic and financial experts to reanalyze and consider other possible models of economic relations between the United Kingdom and the European Union beyond the European Economic Area. Financial services will be influenced by other factors that will need to be considered when designing possible models of economic relations in Europe. (Batsaikhan, Kalcik, & Schoenmaker, 2017). Good examples of these factors are the ability to secure new trading relationships with other countries and the fact that the UK will no longer contribute to the European Union budget. New models of relations must also be better than or equal to previous ones with EU and EEA countries and possible alternatives must be examined (Batsaikhan, Kalcik, & Schoenmaker, 2017). In this case, seven possible models were considered. The first two models could be considered for the UK as a single market or for membership of the European Economic Area. However, there is little chance that the UK will become a member of the European Economic Area or become a single market. The UK does not agree with the four freedoms (people, goods, capital and services) which will also require acceptance of the laws of the European Union and its budget (Batsaikhan, Kalcik and Schoenmaker, 2017). This leaves the UK financial sector without interactions with countries that are part of the European Economic Area. Secondly, remaining in the European Union Customs Union (EUCU) would not be feasible. This union requires its members to apply the European Union's external tariffs on all imports from non-EU countries. (Batsaikhan, Kalcik, & Schoenmaker, 2017). This model, therefore, has little chance and will not be able to thrive after Brexit. This also leaves the financial services sector with limited opportunities and a narrower target market. However, the UK government has made clear that it wants to negotiate free trade agreements with many non-EU countries in an attempt to counteract the loss of trade resulting from leaving the European Union. The Swiss bilateral model is the third model that can be pursued by the UK. The only elements denied by the Swiss model would be contributions to the EU budget, Schegen membership and free movement of people. This model equally leaves the UK financial services sector with limited options to pursue international opportunities, but then leaves the banking and insurance sectors with total control over UK financial services consumers. (Johnson and Mitchell, 2016). The fifth model is not really an option as it offers the UK the opportunity to re-try several previously attempted associations. The UK could rejoin the European Free Trade Association which would allow the country to concludeagreements outside the EU. (Johnson and Mitchell, 2016). EFTA would allow the UK to engage in existing trade agreements that had already been made in previous years, when the UK had ceased to be a member. This leaves no major changes to financial services in the UK with regards to target markets. However, this model is not worth all the UK's efforts. EFTA requires its members to contribute to the EU budget, and if the UK made no changes to their contribution, it wouldn't be any easier. (Johnson and Mitchell, 2016). This model can, therefore, be excluded from the financial sector in the UK because the government has admitted that it would not opt ​​for EFTA membership instead. The sixth model, the Bespoke Free Trade Agreement, is a possibility for the UK government. New integration between the EU and the UK used by countries such as Canada and Switzerland. (Emerson, Busse, Salvo, Gros, Pelkmans, 2017). New ties would mean new effects for the UK's banking and insurance sectors. In case this model is implemented, there will be no coercion to recognize the free development of individuals or influence financial commitments to the EU against the spending plan. New agreements would also be made freely between the UK and other non-EU countries. This would mean that UK financial services would extend, if they so choose, into new markets. The final model would be to subject UK financial services to trading under World Trade Organization rules. In this case it would be possible to trade as a third country with the EU and no preferential trade agreements will be made between the UK and the EU. (Batsaikhan, Kalcik, & Schoenmaker, 2017). Theoretical opportunities and threats posed by Brexit Firstly, the insurance and banking sectors present opportunities arising from Brexit and should be considered for assessment by relevant stakeholders. First, the UK could redirect the 0.7 financial salary allocated to the European Commission towards the expansion and development of its local financial services for better economic stability. (James and Quaglia, 2017). For example, the UK could shift this budget to invest in the World Bank. Second, the opportunity to offer a market window to developing countries with duty-free features and simplified rules of origin instead of the European single market. (James and Quaglia, 2017). This would ensure that these countries benefit from the banking and insurance services offered by the UK while transacting trade with the UK. While this move would require the UK to comply with World Trade Organization rules, there is also a lot that could benefit the UK's financial sector in return. (James and Quaglia, 2017). Third, immigration and population issues could indirectly positively affect the country's banking and insurance sectors. There will be the opportunity for immigrants to settle in the UK, thus expanding the amount of population targeted by financial services stakeholders. Finally, the UK could enjoy 100% of the profits generated by the banking and insurance sectors, both locally and internationally, and budget accordingly for the same sector. There are apparently many threats posed by Brexit to the financial sector. however, it is possible to focus on implementing post-Brexit agendas to counter these threats. As for UK financial services, the direct impacts will mostly be felt., 2016)