Hurtling towards a “hard Brexit,” Britain is likely to leave the European Union in March 2019 without tariff-free access to the bloc’s single market. And it looks like the UK is going to lose a lot if that happens, according to a study by global law firm Baker McKenzie and economic consultancy Oxford Economics.
Their report, sent to Quartz, warns that a “hard Brexit” will mean a £17 billion ($22.7-billion) fall in annual EU export revenues across key UK manufacturing sectors. The car sector is set to be hit the worst, at £7.9 billion:
The reason for the shortfalls: Increased prices for UK exports could make EU consumers switch to domestically produced goods instead. The report uses the benchmark database and model for analysis of international trade policy called the GTAP model (Global Trade Analysis Project).
The report says that Britain would have to increase manufacturing exports to five key markets by 60% to ease the pain. While both Britain and the EU will feel the pinch, the UK is set to be worse off.
For the four main sectors in the report—automotive, consumer, technology and healthcare—the UK takes in just 9% of the EU’s exports, whereas the EU receives a huge 49% of UK exports. This table on the potential “hard Brexit” impact shows how bad it could be for Britain:
“We have heard a lot about how much Europe exports to the UK, for example, in the automotive sector,” said Ross Denton of Baker McKenzie in a statement. “That may be true in numerical terms, but when you look at this as a percentage of their trade, you can clearly see that the EU exports a lot more broadly, to a whole host of other markets, and consequently, it is far less dependent on the UK as a market than the UK is on it. This will have significant implications for upcoming negotiations.”