Brexit Hard Brexit to cost UK economy £400bn by 2030
For countries in the euro area, a UK departure from the European Union – however severe – would result in a cumulative impact on EU GDP of – 2% by 2024. The economic impact on the Netherlands, which was looked into specifically by the Netherlands-based research team, will be higher than on most other EU member states because it has a much closer trade relation with the UK, accruing losses of around €25bn and €35bn.
Immediate impacts of BrexitAccording to the Rabobank study, a hard Brexit outcome implemented in 2019 without a transition period would result in the UK economy immediately falling into a two-year recession period. For the FTA and the soft Brexit scenario there will also be a recession, but milder and much more short-lived.
If negotiations in Brussels result in a hard Brexit, UK GDP is expected to decline by -2.4% following its departure in 2019. However, if the UK and EU were to agree on a freetrade agreement, a GDP decline of -1.1% would be expected, and a -0.3% decline in a soft Brexit scenario.
Fluctuating trade activityWith the EU being the UK’s single most important trading partner, any ‘Brexit’ scenario would result in a slowdown of trade due to higher tariffs and custom controls. In the event of a hard Brexit, export volumes are estimated to be approximately 30% lower than if the UK remained in the European Union, 15% lower in a free trade agreement scenario and 10% lower if the UK negotiates a soft Brexit.
Import volumes would also be impacted, with a hard Brexit resulting in a 27% decline in goods and services coming into the UK. The effect would be 23% in the event of a free trade agreement and 16% in a soft Brexit scenario.
Hugo Erken, senior economist at Rabobank, said: “There has been extensive economic research into the immediate effects of Brexit, but they have largely focused on trade and investment, whereas implications of the different factors that affect productivity is only marginally or partially addressed.” “By looking at dynamics such as innovation, competition, knowledge and human capital, how they will change and what affects this will have on the structural makeup of the UK and European economy, our research shows that the long-lasting impact of Brexit is likely to be more severe than initially anticipated.”