Brexit, a bad business for UK?
Advantages or disadvantages for UK after a Brexit? At the moment only losses are estimated: an exit of the UK from the EU would be particularly expensive for the British economy, around 300 billion of losses according to a study of the German think tank Bertelsmann Stiftung.
- Wednesday, 29 April 2015
So with the upcoming UK elections on the 7th of May and the subsequent referendum on European Union, between electoral announcements and demagogies to run after the votes of the euroscepticists, there’s a risk of no evaluation of the negative impacts on the long term from an hypothetical Brexit in 2018. The fact is that every country would be involved and would lose economically and politically from a Brexit. Even though for Germany and the other member states economic losses would be significantly smaller. Counting the effects of a possible UK exit from the EU is not an easy task, it needs to consider many uncertainties and the transitional periods. In this first study the German think tank is trying to analyze the hypothetical consequences for England and for the EU as well. In the most positive scenario UK would have a status similar to Switzerland and maintain a trade agreement with the EU. While in the worst scenario Britain would lose all the privileges arising from the EU membership and its free trade agreements. But all the possible negative effects, according to the research, will have shown their full impacts only after 12 years from the Brexit, in the 2030. "A BREXIT is a losing game for everyone in Europe from an economic perspective alone, particularly for the UK.-Aart De Geus Chairman and CEO of Bertelsmann Stiftung said- But aside from the economic consequences, it would be an especially bitter setback for European integration as well as Europe’s role in the world. Setting the course for a BREXIT in the House of Commons elections would weaken the EU". The Chairman of Bertelsmann Stiftung insists on the need to advocate strongly for the UK to remain in the EU.
Economic consequences of a Brexit
Considering the scenario of the UK’s trade isolation, the GDP per capita of Britain could register a decrease between 0.6% and 3% in 2030 compared with the value the country would register remaining in the EU. If percentages losses are based on 2014 data, this would mean - in the most favorable scenario- a loss of 220 euro per capita. While thinking on a more severe isolation the GDP lose would be 1.025 per capita. The GDP losses could further increase (by 14%) as a consequence of a decrease of the economic dynamism and the weakening of the innovative power of London as a financial centre. So if the losses percentages are based on 2014 values this would been a GDP around 313 billion lower for the entire economy, 4.850 euro per capita. Furthermore the very few savings that would arise from a Brexit, like the cancellation of the payments for the EU budget, that are around the 0.5% of the British GDP, would not compensate in any case the economic losses, even in the most favorable scenario.
While regarding the costs of trades with the EU they would increase and so the trade activities would be reduced. However, the severity of the impacts would be different on the British individual industries.
The important areas of financial services, the anticipated losses would achieve an added value of 5% in the worst hypothesis. While the chemical industries, mechanical engineering and automotive industries would be swamped from losses in added value because they are incorporated in European chains. The worse effect would be in the chemical industries : -11%.
The Brexit impact on EU countries
The economic losses , according to the study, in Germany and other member states would be significantly smaller. Indeed considering a level of UK isolation of the trade extension, the real GDP per capita in Germany, examining only the effects on trade, would s between 0.1% and 0.3 % in 2030. All this, based on the values of 2014 would mean a loss per capita between 30 and 115 euro. Individual industries would have different consequences because of the decrease of exports to England. The automotive sector would register the worst losses, with a decline up to 2%. Furthermore the automotive industries, food and production metal industries would shrink. Examining the dynamism of the consequences, Germany could have losses between 0.3% and 2% on the GDP per capita. Considering the GDP levels in 2014, that would be mean a loss of around 100 euro per capita, around 8.7 billion on the entire economy analyzing a low level of UK isolation. While the scenario would be worst if UK would lose all the EU trade privileges and losses for Germany would be 700 euro per capita, around 58 billion on the entire economy. Ireland, Belgium, Sweden, Cyprus, Luxembourg and Malta would pay more for the Brexit. However all the EU member states should pay more every year to maintain the European budget: for example Germany should pay 2.5 billion euro more, France 1.9 billion, Italy almost 1.4 billion.