EU to Lose 40bn Annually From No-Deal Brexit, While US & Russia Prosper - Study

14:55 GMT, 22 March 2019

While the potential economic destabilisation for the UK and EU wrought by a Brexit of any kind, including a no-deal one, has been the subject of debate since the 2016 referendum, a new study paints a rather dark picture of what to expect.

Sputnik

A no-deal Brexit will cause significant damage to the economies of European Union nations, while countries such as the USA, Russia and China may actually benefit, according to a new study by the German Bertelsmann Foundation.

The paper makes the grim economic forecast that the UK alone will be afflicted by losses of €57 billion per year if it crashes out of the EU without a deal, while the rest of the bloc will lose about €40 billion — a great deal of which would be shouldered by Europe's largest economy and chief exporter to the UK — Germany.

Such potentially catastrophic losses are expected to be caused by increased prices of food and services as the consequence of new tariffs that would kick in after a no-deal exit. As it stands there are no tariffs in the EU's single market.

According to a study by the Bertelsmann Foundation, a UK exit from Europe without an agreement would cost Germany around € 10 billion and France about € 8 billion a year.

One of the report's authors, Dominic Ponattu, has been quoted as saying that, "British exiting means less competition for goods and services — this also leads to increasing prices and also lower wage growth."

Yet, it might not be bad news all round. A number of countries outside of the bloc may actually benefit from a no-deal scenario, the report's authors say. Income levels in the United States could potentially rise by about €13 billion per annum. The report also prognosticates that China may see its incomes increase by about €5 billion per year, while Russia's may spike by approximately €260 million.

Accounting for this, the report says that "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."

Among EU constituent nations, it is those with export-oriented economies that are expected to suffer the most, such as Germany, for whom the UK is a top five export market. The report says that income losses for people in Germany will hit around €10 billion per year, and the country's key export hubs in the southern state of Bavaria and the western state of North Rhine-Westphalia could take a severe battering.

Yet, the report's authors also conclude that a ‘soft' Brexit, while still inflicting some economic damage, would be comparatively better for the economies of the EU. An orderly Brexit would lead to income losses of €5 billion in Germany and of approximately €32 billion in the UK.