Brexit to cost billions in income losses across Europe

Brexit — soft or hard — is expected to cost Europeans billions of euros every year in the form of reduced incomes, a new study by Germany’s Bertelsmann Foundation shows.

The impact would be particularly huge if Britain were to leave the European Union without a deal.

The losses are expected to be mainly driven by higher prices of goods and services as a result of tariffs that would kick in after Brexit. Currently, there are no tariffs in the EU single market.

“Also, the 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.

With just some days left before the March 29 Brexit deadline, there is still no clarity on whether Britain will leave the 28-nation bloc with or without a deal. British Prime Minister Theresa May has struggled to convince lawmakers to back an exit deal reached between her government and the EU. May has sought an extension of the Brexit deadline.

Citizens in the European Union, excluding the UK, would have to endure income losses of around €40 billion ($45 billion) every year in the event of a hard Brexit, the study showed.

People in Britain stand to suffer €57 billion (48 billion pounds), or €873 per capita, in annual income losses following a “no-deal” Brexit.

“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,” Aart de Geus, the chairman of the Bertelsmann Stiftung, said.

Germany worst hit in EU

Export-oriented countries such as Germany and France are expected to suffer the most from a hard Brexit.

The study pegs income losses for people in Germany at around €10 billion per year.

Germany’s industrial and export hubs in the southern states of Bavaria and Baden Württemberg and the western state of North Rhine- Westphalia are expected to be severely affected.

The United Kingdom was among the top five export destinations for German companies in 2017 and saw over €85 billion worth of goods shipped from Germany, Europe’s largest economy and exporter.

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

Read more: Hard Brexit risks 100,000 German jobs: report

‘Soft’ Brexit, softer impact

If Britain were to leave the EU with a deal, then the impacts are likely to be far less severe, the study showed.

The losses in the European Union, excluding the UK, could nearly halve in the event of a “soft” Brexit.

An orderly Brexit would lead to income losses of €5 billion in Germany and of around €32 billion in the UK.

US, China to benefit

Some countries outside of the European Union stand to benefit from Brexit, especially a disorderly one.

Incomes in the United States could rise by around €13 billion annually following a hard Brexit.

China would see incomes rise by around €5 billion annually. In Russia, Brexit could cause incomes to rise by around €260 million annually.

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

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    June 2016: ‘The will of the British people’

    After a shrill referendum campaign, nearly 52 percent of British voters opted to leave the EU on June 24. Polls had shown a close race before the vote with a slight lead for those favoring remaining in the EU. Conservative British Prime Minister David Cameron, who had campaigned for Britain to stay, acknowledged the “will of the British people” and resigned the following morning.

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    July 2016: ‘Brexit means Brexit’

    Former Home Secretary Theresa May replaced David Cameron as prime minister on July 11 and promised the country that “Brexit means Brexit.” May had quietly supported the Remain campaign before the referendum. She did not initially say when her government would trigger Article 50 of the EU treaty to start the two-year talks leading to Britain’s formal exit.

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    March 2017: ‘We already miss you’

    May eventually signed a diplomatic letter over six months later on March 29, 2017 to trigger Article 50. Hours later, Britain’s ambassador to the EU, Tim Barrow, handed the note to European Council President Donald Tusk. Britain’s exit was officially set for March 29, 2019. Tusk ended his brief statement on the decision with: “We already miss you. Thank you and goodbye.”

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    June 2017: And they’re off!

    British Brexit Secretary David Davis and the EU’s chief negotiator, Michel Barnier, kicked off talks in Brussels on June 19. The first round ended with Britain reluctantly agreeing to follow the EU’s timeline for the rest of the negotiations. The timeline split talks into two phases. The first would settle the terms of Britain’s exit, and the second the terms of the EU-UK relationship post-Brexit.

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    July-October 2017: Money, rights and Ireland

    The second round of talks in mid-July began with an unflattering photo of a seemingly unprepared British team. It and subsequent rounds ended with little progress on three phase one issues: How much Britain still needed to pay into the EU budget after it leaves, the post-Brexit rights of EU and British citizens and whether Britain could keep an open border between Ireland and Northern Ireland.

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    November 2017: May pays out?

    Progress appeared to have been made after round six in early November with Britain reportedly agreeing to pay up to £50 billion (€57 billion/$68 billion) for the “divorce bill.” May had earlier said she was only willing to pay €20 billion, while the EU had calculated some €60 billion euros. Reports of Britain’s concession sparked outrage among pro-Brexit politicians and media outlets.

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    December 2017: Go-ahead for phase 2

    Leaders of the remaining 27 EU members formally agreed that “sufficient progress” had been made to move on to phase two issues: the post-Brexit transition period and the future UK-EU trading relationship. While Prime Minister Theresa May expressed her delight at the decision, European Council President Tusk ominously warned that the second stage of talks would be “dramatically difficult.”

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    July 2018: Johnson, Davis resign

    British ministers appeared to back a Brexit plan at May’s Chequers residence on July 6. The proposal would have kept Britain in a “combined customs territory” with the EU and signed up to a “common rulebook” on all goods. That went too far for British Foreign Minister Boris Johnson and Brexit Secretary David Davis, who resigned a few days later. May replaced them with Jeremy Hunt and Dominic Raab.

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    September 2018: No cherries for Britain

    May’s Chequers proposal did not go down well with EU leaders, who told her at a summit in Salzburg in late September that it was unacceptable. EU Council President Tusk trolled May on Instagram, captioning a picture of himself and May looking at cakes with the line: “A piece of cake perhaps? Sorry, no cherries.” The gag echoed previous EU accusations of British cherry-picking.

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    November 2018: Breakthrough in Brussels

    EU leaders endorsed a 585-page draft divorce deal and political declaration on post-Brexit ties in late November. The draft had been widely condemned by pro- and anti-Brexit lawmakers in the British Parliament only weeks earlier. Brexit Secretary Dominic Raab resigned along with several other ministers, and dozens of Conservative Party members tried to trigger a no-confidence vote in May.

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    December 2018: May survives rebellion

    In the face of unrelenting opposition, May postponed a parliamentary vote on the deal on December 10. The next day, she met with German Chancellor Angela Merkel to seek reassurances that would, she hoped, be enough to convince skeptical lawmakers to back the deal. But while she was away, hard-line Conservative lawmakers triggered a no-confidence vote. May won the vote a day later.

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    January 2019: Agreement voted down

    The UK Parliament voted 432 to 202 against May’s Brexit deal on January 16. In response to the result, European Council President Donald Tusk suggested the only solution was for the UK to stay in the EU. Meanwhile, Britain’s Labour Party called for a no-confidence vote in the prime minister, her second leadership challenge in as many months.

  • Brexit timeline: Charting Britain’s turbulent exodus from Europe

    March 2019: Second defeat for May’s deal

    May tried to get legal changes to the deal’s so-called Irish backstop in the weeks that followed. She eventually got assurances that the UK could suspend the backstop under certain circumstances. But on March 12, Parliament voted against the revised Brexit deal by 391 to 242. EU leaders warned the vote increased the likelihood of a no-deal Brexit. Two days later, MPs voted to delay Brexit.

    Author: Alexander Pearson

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