EU to Lose EUR 40 Billion a Year from No-Deal Brexit, US, China, Russia to Benefit, Study Finds

EU to Lose EUR 40 Billion a Year from No-Deal Brexit, US, China, Russia to Benefit, Study Finds

The income losses from a soft Brexit will be twice as small.

The citizens of the European Union will be losing approximately EUR 40 billion (USD 45 billion) in total income per year in case of a no-deal Brexit, while the USA, China, and Russia are expected to benefit from that, according to a study of the Bertelsmann Foundation in Germany.

A soft or hard Brexit is going to cause large-scale losses to the citizens of both the European Union and the UK but they will be much higher in the no-deal scenario, the study has found.

The study results about the losses from Brexit were published just as the EU agreed to grant the UK a brief extension on its departure from the Union, a week before the originally set Brexit date of March 29, 2019.

The losses from Brexit will be mostly the result of higher prices of goods and services caused by tariffs that would kick in after Brexit, whereas there a no tariffs whatsoever at present in the entire single market of the European Union.

“T he British exiting means less competition for goods and services — this also leads to increasing prices and also lower wage growth,” Dominic Ponattu, one of the two authors of the study, told DW.

“European value chains are negatively affected by Brexit. This would make trade within Europe more expensive and trade with the rest of the world could become more attractive,” Ponattu added.

While in the event of a hard (no-deal) Brexit, the citizens of the EU 27 will see income losses of around EUR 40 billion (USD 45 billion) every year, the losses for the UK will far higher for a far smaller population and market: EUR 57 billion (GBP 48 billion), or a loss of EUR 873 per capita.

Within the EU 27, the largest European economy, Germany, will be hit the hardest by a no-deal Brexit, with losses estimated at about EUR 10 billion per year.

Most affected will be Germany’s industrial and export hubs in the southern states of Bavaria and Baden – Württemberg and the western state of North Rhine – Westphalia.

In 2017, Germany exported to the UK goods worth EUR 85 billion, ranking Britain among the top 5 destinations for German exports.

France and Italy would also see significant income losses amounting to billions of euros, the study of the Bertelsmann Foundation concluded.

If, however, the UK leaves the EU with a deal, the negative annual economic impact from this so called soft Brexit scenario will be far smaller, probably as little as half of what would have been lost in case of a no deal departure.

Thus, an orderly Brexit is estimated to cause Germany an annual income loss of EUR 5 billion, while the UK will be losing EUR 32 billion per year.

Meanwhile, some of the EU’s top competitors in international politics are expected to benefit from Brexit, the Bertelsmann Foundation study found.

Thus, incomes in the USA could grow by EUR 13 billion per year as a result of a hard Brexit, while in China the income increase could be around EU 5 billion per year. Russia would also benefit, to the end of EUR 260 million per year.

“European value chains are negatively affected by Brexit This would make trade within Europe more expensive and trade with the rest of the world could become more attractive,” Ponattu said.

“Brexit could seriously damage the foundations of the world’s largest economic area. Brussels and London must do everything they can to achieve an agreement,” stated Aart de Geus, the chairman of the Bertelsmann Foundation in Germany.

(Banner image: Pixabay)

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