Thursday

23rd May 2019

Ireland and Luxembourg would be biggest Brexit losers

  • Ireland would be the biggest loser from a Brexit, according to the Bertelsmann-Stiftung think tank (Photo: Dees Chinniah)

Ireland and Luxembourg would be hardest hit economically if the UK decided to leave the EU, according to a new report.

The paper published Monday (27 April) by the German think tank Bertelsmann-Stiftung, looks at three possible scenarios under which the UK could leave the 28 country bloc - a ‘soft exit’ where the UK secures a trade agreement and status comparable to that of Norway and Switzerland; a ‘deep cut’, where it enjoys trading status equivalent to that between the EU and the United States; and ‘isolation’.

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Under the best case scenario, the Irish economy would contract by at least 0.8 percent and Luxembourg’s by 0.5 percent, compared to a minimum 0.6 percent loss of output, equivalent to €220 per person, which the UK would incur.

However, Ireland, which is the UK’s largest trading partner, would suffer a 2.7 percent economic hit if the UK were unable to agree an EU trade deal.

The study also assesses how different economic sectors would be affected, concluding that financial services, the largest contributor to the UK economy, would decline by 5 percent.

The chemicals, mechanical engineering and car industry would also see steep losses, with the chemicals industry facing the greatest drop of nearly 11 percent.

More than 50 percent of the UK’s exports go to the EU, while over 50 percent of its imports come from the bloc.

The Bertelsmann paper is the second study this month to suggest that the Irish economy would suffer greater losses than the UK. The uncertainty prompted Irish prime minister Enda Kenny to comment earlier this month that a UK exit from the EU was a “very serious concern” for Ireland.

Shorn of the UK, the EU would see a reduction in real GDP per capita due to lower trade activity with the UK of between 0.1 percent with a ‘soft’ Brexit and around 0.4 percent in case of UK isolation.

The paper adds that cancelling its annual contributions to the EU budget would “represent the UK’s greatest economic benefit from a Brexit”.

To account for lost revenues from the UK coffers, Germany would have to pay in an extra €2.5 billion (gross) per year. France would have to pay an additional €1.9 billion, Italy almost €1.4 billion and Spain around €0.9 billion.

“We are firmly convinced that the combination of economic and political dis- advantages of the UK exiting the EU would be detrimental for everyone involved and must be avoided,” the paper concludes.

“A Brexit is a losing game for everyone in Europe from an economic perspective alone – particularly for the UK,” said Aart de Geus, chairman of Bertelsmann-Stiftung.

Britons will effectively decide whether or not a plebiscite will take place when they go to the polls next Thursday (7 May). David Cameron’s Conservatives have promised to hold an ‘in/out’ referendum by the end of 2017 if they are re-elected, a stance opposed by the opposition Labour party and the Liberal Democrats.

Opinion polls suggest that neither the Conservatives or Labour will be able to form a majority following the elections, raising the prospects of a second successive coalition government.

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