Several studies so far have shown how Brexit will negatively affect Germany and Europe. A new one paints a similarly dismal outlook. Researchers at the Bertelsmann Foundation investigated how different regions across Europe would be affected when it comes to income losses after the UK leaves the EU.
In the absence of a withdrawal agreement between the UK and the EU, people living in EU countries (excluding the UK) would have to bear huge income losses of €40 billion euros per year, the study predicts.
The authors of the report said that, unsurprisingly, the British themselves would be hit hardest in a no-deal scenario. UK citizens would suffer income losses of €57 billion per year (around €900 euros per capita).
In Germany, too, the loss of income would be high at around €10 billion per year, making it the hardest hit country in Europe after the UK. France and Italy would also see significant income losses amounting to billions of euros.
The losses are expected to be mainly driven by higher prices of goods and services as a result of tariffs that would kick in after Brexit. Currently, there are no tariffs in the EU single market.
Meanwhile, the US and China could actually benefit from Brexit. For the analysis, economists Giordano Mion of the University of Sussex and Dominic Ponattu economic expert with the Bertelsmann Foundation, analyzed data on global trade flows to predict the consequences of a Brexit.
“European value chains are negatively affected by Brexit,” said Ponattu. “This would make trade within Europe more expensive and trade with the rest of the world could become more attractive.”
The west and south of Germany hardest hit
In Germany, the areas in and around Düsseldorf and Cologne in the industrial region of North Rhine-Westphalia (NRW), would be affected the most in a no-deal scenario. In these areas the report authors expect income losses totaling €650 million (Dusseldorf) and €560 million euros (Cologne) per year – these figures correspond to around €126 euros per citizen per year.
NRW is Germany’s top industrial region and hosts 37 of Germany's top 100 corporations. It also has a significant small and medium business sector.
The government districts of Upper Bavaria (including the greater Munich area) would follow with an expected loss of €526 million euros per year (€115 euros per capita) in income.
An Audio logo in Ingolstadt, Bavaria. Photo: DPA.
According to the authors, Upper Bavaria could cushion the Brexit losses better than NRW. That's because there are global players such as Audi in Ingolstadt and BMW in Munich, for whom trade with China and the USA is much more important.
Next comes Stuttgart, also a leader in car manufacturing, where €473 million is at stake, or €116 euros per citizen.
Brexit good news for the world – but not Europe
According to the simulations by the researchers, US incomes would benefit from a no-deal and could rise by around €13 billion annually.
In China, incomes could rise by around €5 billion annually, while in Russia a slight increase of around €260 million annually would be expected due to Brexit.
Withdrawal agreement makes a huge difference
Meanwhile, if there is a withdrawal agreement when the UK leaves the bloc, the outlook would be significantly better.
The authors said this could halve the loss of income for Germany to €5 billion compared to the no-deal scenario. In the UK, the losses would be around €32 billion. The whole of the EU, excluding the UK, would see annual income losses of around €22 billion if there is a deal in place, the report predicated.