The British public has been consistently reminded in recent weeks and months of the high economic impact of Brexit. Just last week the RAND Corporation, one of the world’s largest think tanks, looked at the effect of various forms of Brexit on the European, British and American economies and found that the UK would be better off under a “no-Brexit” outcome.
For Brexit supporters like myself, this study comes as no surprise. We have long been told by experts that we would be better off remaining inside the European Union; whether it be for economic, security, or political reasons. However, whilst the short-term might be difficult, it is my belief that these drawbacks are significantly outweighed by the logical long-term benefits; being free to negotiate trade deals with the rest of the world, spending the £8bn per year net contribution into Europe on initiatives to bolster Britain’s economy, and cutting out the bureaucracy which impacts businesses.
While such studies have focused on the economic impact of the UK leaving the EU, we have not seen similar time and effort spent researching the potential damage to Europe if no trade deal is secured with the UK. The UK-EU trade deficit stands at a staggering £82bn. Our trade deficit with Germany and France alone is nearly £30bn, according to the latest ONS figures, highlighting how they stand to bear the brunt of the economic impact of Brexit.
In 2016, UK exports to the EU amounted to £236 billion; 44 percent of all UK exports. Comparatively, the EU exported £318 billion to the UK market; 53 percent of all UK imports, and consequently the EU’s second largest single market for its goods.
The UK’s overall trade deficit with the EU, and specifically with key players like Germany, puts it in a very strong negotiating position. In purely commercial and economic terms it is in the EU’s best interests to secure a UK trade deal and maintain a positive relationship.
But this has clearly not been the view shared by EU negotiators. Progress has been undermined by political interests, and the over-riding intent to maintain the European project at any cost. Germany, France, and other European powers are foregoing their economic interests to ensure the Brexit process is as painful as possible, in an effort to deter other members from following the same path. They are thinking purely politically, ignoring the serious commercial consequences of such a strategy.
As the UK’s largest import partner, Germany is likely to face the greatest economic impact of Brexit. On average, £6 billion worth of German goods flow into Britain every month. A huge number of jobs at German companies, including the likes of BMW and Siemens, depend on trade with the UK. The latest sales figures for German cars in the UK market must, therefore, be a huge concern for German politicians and businesses, especially since we have seen a 20 percent drop following the vote to leave – as grave as during the financial crisis.
The fall in car sales is a sign of the immediate economic impact that EU nations such as Germany face as a consequence of Brexit. The logical next step for businesses across Europe is to cut the price of goods sold in the UK, especially given the drop in sterling, or otherwise risk a significant fall in demand. Why, therefore, would they risk exacerbating the situation with a commercially harmful and undesirable tariff war?
Clearly, the EU and Britain want to carry on trading. It is foolish to imagine that British consumers will stop buying goods from European partners simply because we are not a member of the EU. And, the reverse is also true; members of the EU will still want access to the UK market. However, the UK’s freedom to negotiate trade deals with the rest of the world is set to drastically increase the competition European countries face in winning over the British consumer. It therefore stands to reason that the EU’s negotiating stance should be firmly fixed on commercial grounds.
Key European states should be doing all they possibly can to help maintain the same levels of trade seen prior to the vote to leave. A failure to do so is mutually damaging for economies across Europe.
The UK should stand firm to get the best possible deal it can, remembering the strong negotiating position it is in. If key European member states want to make the best of Brexit commercially, their negotiating stance must change. Best interests will not be served by making an example of the UK for its democratic decision to leave. Commerciality, not political point scoring, is now required to make the best of Brexit.