U.N. warns this is a conservative estimate and real losses could be much greater
Britain could lose at least $16 billion annually on exports to the European Union if it leaves without a deal and possibly billions more on trade beyond the bloc, U.N. economists said on Tuesday.
In a fresh report, the U.N. Conference on Trade and Development (UNCTAD) found that “a loss of preferences in the E.U. market consequent to a no-deal Brexit will result in U.K. export losses of at least $16 billion,” representing seven percent of its overall exports to the bloc.
The economists said “this is a conservative estimate,” since it only takes into account the raising of tariffs from the current zero percent that Britain pays on exports within the E.U. “In reality, the losses would be much greater because of non-tariff measures, border controls and disruption of existing U.K.-E.U. production networks,” they warned.
The UNCTAD economists said Britain’s total merchandise exports last year stood at around $450 billion, and that its exports to other E.U. countries accounted for about half of that amount.
The report was released as British Prime Minister Boris Johnson lost his working majority in parliament ahead of a showdown with rebel M.P.s over fears he is steering the country towards a no-deal Brexit next month, which could lead to a snap election within weeks. “The nearing Brexit deadline, along with increased uncertainty on outcomes, is problematic for U.K. exporters,” UNCTAD said in a statement, urging London to quickly seek policy solutions to provide at least short-term relief to the “Brexit crunch.”
The economists said that most of the British losses in the E.U. market would be concentrated in motor vehicles, which would take a $5-billion hit; meat and other animal products as well as the apparel and textile sector, which are both set to suffer losses of around $2 billion.
At the same time, the report cautioned that British exporters also stand to take a significant hit on trade beyond the E.U. Through its E.U. membership, Britain today is part of around 40 trade agreements offering members of the bloc preferential market access in about 70 countries.
“In the event of a no-deal Brexit, and in the absence of replacement agreements (rollover deals), the U.K. would abruptly lose preferential access to these markets and, by default, would have to export under World Trade Organization Most Favored Nation (MFN) tariffs,” the report said.
Most of Britain’s exports beyond the E.U. go to countries that do not currently give preferential treatment to the bloc, including China and the United States. But about 20 percent of the country’s non-E.U. exports are at risk of facing higher tariffs from countries such as Turkey, South Africa, Canada and Mexico, UNCTAD said, estimating that this could cost the British economy nearly $2 billion in exports.