BACKGROUND | EUROPEAN POLICY | BREXIT
Trade in Goods: What is at Stake? The Costs of Brexit
27 February 2018
Basic Facts On 23 June 2016, the United Kingdom (UK) voted to exit the European Union (EU). On 29 March 2017, the UK officially notified the EU of its intention to leave by triggering Article 50 of the Treaty on European Union (TEU). The EU and the UK have until 29 March 2019 to agree on the conditions of the withdrawal and the nature of their future partnership.
Whichever arrangement ultimately governs the future economic relations between the EU27 and the UK, it will inevitably be less deep and extensive than the current full membership in the European Union.
For the UK, trade with the EU27 countries is of great importance. In 2016, seven of the top ten export destinations of the UK were EU27 countries, and as were six out of the top ten import origins. From 2002 to 2016, the volume of merchandise trade between the UK and the other EU Member States increased by 15.8 per cent.
The high degree of integration between the UK and the EU27 is underlined by trade in intermediate products. In 2014, the EU27 Members States shipped intermediate products worth around $230 billion to the UK. The United Kingdom exported intermediate products worth $202 billion to the EU27 the same year.
The UK seems to have lost some of its appeal as a business location for global investors in recent years. In 1990, 9.2 per cent of global FDI stocks were invested in the UK. This figure was down to 4.5 per cent in 2016. Investors from EU27 countries have nonetheless created 1.4 million jobs in the UK.
Studies show that Brexit will have negative economic effects for both sides, with the UK in danger of losing much more. For the UK, the cumulative effects until 2030 could amount to a loss of approximately 1.3 per cent of GDP under an optimistic scenario and 2.7 per cent under a pessimistic scenario according to a study by the LSE (LSE: 2017, static model, trade in goods only). For the EU27, the losses in GDP are estimated to range between 0.14 per cent under an optimistic scenario and 0.35 of GDP under a pessimistic scenario (LSE: 2017).
Stormy-Annika Mildner, Steven Heckler, Klara Schwobe, Christoph Sprich, Katherine Tepper, Eckart von Unger, | External Economic Policy | www.bdi.eu