The Strategist

“Hard” Brexit will cost companies € 65 bln per year

03/13/2018 - 14:36

The free trade agreement between the EU and London is not enough, German experts believe, calling for a customs union. However, Britain intends to pursue an independent economic policy, writes FAZ.

In the case of a “hard” Brexit, EU and UK companies will face additional annual costs of at least EU 65 billion due to appearance of customs duties, with a majority of 35 billion accounting for the EU, reports the newspaper Frankfurter Allgemeine Zeitung.

This information is contained in a joint study of international consulting company Oliver Wyman and the law firm Clifford Chance, which is available to FAZ. The estimated expenditures make up almost 15 percent of the trade turnover between the two states, the authors note.

Experts call for a customs union

From the economic point of view, the conclusion of the free trade agreement Brussels and London is not enough for companies, says Joachim Lang, chief executive secretary of the Federal Association of German Industry (Bundesverband der Deutschen Industrie, BDI). The leading union of the British industry CBI also calls for a customs union.

According to experts, “hard” Brexit means an additional cost of EU 9 billion for firms and concerns in Germany. 80 percent of the extra spending will affect five industries - automobile, chemical, food, machinery and consumer goods.

If the EU and the UK do not come to a consensus on free trade, their economic relations will be governed by the principles of the World Trade Organization. The regime of the customs union will reduce the estimated costs by almost half, the authors of the study note.

However, British Prime Minister Theresa May stated her intention to pursue an independent economic policy and not enter into customs alliances with the EU after the Brexit. According to May, this will allow Britain to conclude its own trade agreements with China and India.