A study conducted on behalf of the Federal Ministry for Economic Affairs and Energy and published today shows that the UK’s departure from the EU single market will have a significantly lower impact on the German, EU and UK economies now that a comprehensive free trade deal has been struck than would have been the case without a deal. The study also shows that has already begun to impact German GDP, as trade with the United Kingdom has been declining for some time now in anticipation of the UK’S final separation from the EU.
said: “The conclusion of a comprehensive agreement between the EU and the United Kingdom without tariffs and without quotas sends a good signal for the German, EU and UK economies. It shows that keeping the UK in the EU single market would still have been the economically best solution. But it also shows that German companies have already prepared for the UK’s departure from the EU single market. The immediate effects of Brexit on future trade relations with the UK are likely to be smaller than many had feared.”
The Federal Ministry for Economic Affairs and Energy commissioned the ifo Institute, Munich, together with the Kiel Institute for the World Economy, to update the original 2017 study entitled ‘Economic Effects of Brexit on the German and European Economy’. The study examines two scenarios: the economic effects of the UK leaving the EU based on a deep and comprehensive agreement on the future relationship being in place (“with-a-deal” scenario) and based on no such agreement being in place (“no-deal” scenario). It also provides a descriptive analysis of trade links and the value-added chain and the way in which these have changed since the Brexit referendum in 2016.
Work on the details of the “with-a-deal” scenario used for the study continued throughout the run-up to the conclusion of the agreement. According to this scenario, as a result of Brexit, real gross domestic product will fall in the long term by 0.14% (equivalent to around €4.9 billion) in Germany, by 0.16% in the EU and by 0.95% in the United Kingdom. Without an agreement, the effect on GDP in the long term would have been -3.37% in the UK, -0.53% in Germany and -0.62% in the EU.
The results of the study also indicate that German companies have already partially withdrawn from the UK market. For example, the study shows that German trade with the UK has been declining for several years. In contrast, the EU-27 and third countries such as China and the US have gained in importance as sales markets for Germany. The study also shows that German producers do not have any strong supply dependencies on the UK and that German trade is quite diversified.