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Brexit: a “no deal” would be very expensive

A Brexit without agreement with the European Union would cost 8% of gross domestic product (GDP) in the UK for more than ten years. That is a cumulative loss of 3,600 billion euros, the equivalent of a year and a half of GDP.

This is what has just been calculated by “UK in a Changing Europe”, a research center which wants to be impartial and works on Brexit within the prestigious King’s college of London.

Consumption slowed down

First cause: the application of “standard” customs duties (10%) by Brussels would make British exports to the Union more expensive. Dramatic for the “made in UK” automotive industry, which exports 55% of its production. However, in Wales, Ford and Honda have just cut 3,700 jobs.

Conversely, even if the customs duties already announced by London are lower, they will slow down consumption by making imported products more expensive. 4% for British food, which is imported up to a third. Not good for the French food industry, which provides 10% of these imports.

Customs’ formalities

The breakdown of free access to the European market promises to be formidable for financial services. They represent 6.9% of the economy across the Channel. Not just in London, but also in Scotland, where they employ more than 60,000 people in Glasgow and Edinburgh. Also sanctioned, airlines which could certainly continue to reach Europe, but not provide domestic routes.

As regards electricity, the decoupling of the Community market will force the United Kingdom to secure and increase its production capacity, which could cost it 260 to 310 million euros per year.

And then there will be the paperwork, the checks… Not just in the ports of Northern Ireland, this is likely to become a back door into the Union, with which it could retain free access. But all over the UK, where 180,000 businesses will find out about customs formalities. And come to terms with the probable congestion of goods in the ports. The British government estimated that without a deal, the 1is January, 7,000 trucks will remain stuck for two days in Kent.

A Brexit with a free trade agreement would only partially alleviate these nuisances: Britain’s GDP would still stumble by almost 5% for more than ten years.

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