IDEAS home Printed from https://ideas.repec.org/p/nbb/reswpp/201901-366.html
   My bibliography  Save this paper

A survey of the long-term impact of Brexit on the UK and the EU27 economies

Author

Listed:
  • Patrick Bisciari

    () (Economics and Research Department, National Bank of Belgium)

Abstract

This paper reviews a sample of studies on the long-term impact of Brexit on GDP and welfare for both the UK and EU economies. It considers only official and academic studies published before the end of November 2018. The paper highlights the very wide range of results, especially for the UK, reflecting great uncertainty. The negative economic impact is more limited for the EU27 and for most Member States. Small open economies closely related to the UK are more hit than others. This is the case for Ireland due to geographical proximity, for Luxembourg with its economy specialising in financial services and for Cyprus and Malta as they are Commonwealth countries. When only the trade channel of Brexit is estimated, GDP (or welfare) losses are around 1 percentage point of GDP in the Netherlands and in Belgium while these average 0.6 percentage point of GDP in the EU27. For a same Brexit scenario, the results depend on the model specifications, on the channels considered and on some key assumptions. For the UK higher GDP/welfare losses are found for reduced-form approaches, when a productivity shock is added and, also for the EU, for global value chain approaches. Higher GDP/welfare losses are also associated with higher non-tariff trade barriers. Results are sensitive to some parameters such as the reaction of trade volumes to changes in tariffs and non-tariff trade barriers (trade elasticities). Reaching a Free Trade Agreement could limit the GDP/welfare losses both for the UK and the EU Member States compared to an orderly no deal (WTO scenario). If the UK remains in the Single Market or the Customs Union, the GDP/welfare losses induced by Brexit could be even more contained. This justifies the economic interest for both the UK and the EU Member States to reach an agreement on their future relationship.

Suggested Citation

  • Patrick Bisciari, 2019. "A survey of the long-term impact of Brexit on the UK and the EU27 economies," Working Paper Research 366, National Bank of Belgium.
  • Handle: RePEc:nbb:reswpp:201901-366
    as

    Download full text from publisher

    File URL: https://www.nbb.be/doc/oc/repec/reswpp/wp366en.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Gabriel Felbermayr & Jasmin Gröschl & Thomas Steinwachs, 2018. "The Trade Effects of Border Controls: Evidence from the European Schengen Agreement," Journal of Common Market Studies, Wiley Blackwell, vol. 56(2), pages 335-351, March.
    2. repec:cep:cepbxt:02 is not listed on IDEAS
    3. Peter Egger & Joseph Francois & Miriam Manchin & Douglas Nelson, 2015. "Non-tariff barriers, integration and the transatlantic economy," Economic Policy, CEPR;CES;MSH, vol. 30(83), pages 539-584.
    4. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    5. Joseph Francois & Miriam Manchin & Hanna Norberg & Olga Pindyuk & Patrick Tomberger, 2013. "Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment," IIDE Discussion Papers 20130401, Institue for International and Development Economics.
    6. Mulabdic,Alen & Osnago,Alberto & Ruta,Michele, 2017. "Deep integration and UK-EU trade relations," Policy Research Working Paper Series 7947, The World Bank.
    7. Dhingra, Swati & Ottaviano, Gianmarco I. P. & Sampson, Thomas & Reenen, John Van, 2016. "The consequences of Brexit for UK trade and living standards," LSE Research Online Documents on Economics 66144, London School of Economics and Political Science, LSE Library.
    8. Gabriel Felbermayr & Clemens Fuest & Jasmin Katrin Gröschl & Daniel Stöhlker, 2017. "Economic Effects of Brexit on the European Economy," EconPol Policy Reports 4, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    9. Thierry Mayer & Vincent Vicard & Soledad Zignago, 2018. "The Cost of Non-Europe, Revisited," Working papers 673, Banque de France.
    10. Sampson, Thomas, 2017. "Brexit: The Economics of International Disintegration," CEPR Discussion Papers 12301, C.E.P.R. Discussion Papers.
    11. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    12. Thomas Sampson, 2017. "Brexit: The Economics of International Disintegration," CESifo Working Paper Series 6668, CESifo Group Munich.
    13. Thomas Sampson, 2017. "Brexit: The Economics of International Disintegration," CEP Discussion Papers dp1499, Centre for Economic Performance, LSE.
    14. repec:aea:jecper:v:31:y:2017:i:4:p:163-84 is not listed on IDEAS
    15. Csilla Lakatos & Lars Nilsson, 2017. "The EU-Korea FTA: anticipation, trade policy uncertainty and impact," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(1), pages 179-198, February.
    16. Sampson, Thomas, 2017. "Brexit: the economics of international disintegration," LSE Research Online Documents on Economics 86591, London School of Economics and Political Science, LSE Library.
    17. Ebell, Monique & Hurst, Ian & Warren, James, 2016. "Modelling the long-run economic impact of leaving the European Union," Economic Modelling, Elsevier, vol. 59(C), pages 196-209.
    18. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    19. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    20. Monique Ebell & James Warren, 2016. "The Long-Term Economic Impact of Leaving the EU," National Institute Economic Review, National Institute of Economic and Social Research, vol. 236(1), pages 121-138, May.
    21. Massimiliano Pisani & Filippo Vergara Caffarelli, 2018. "What will Brexit mean for the British and euro-area economies? A model-based assessment of trade regimes," Temi di discussione (Economic working papers) 1163, Bank of Italy, Economic Research and International Relations Area.
    22. repec:cep:cepbxt:03 is not listed on IDEAS
    23. repec:cep:cepbxt:12 is not listed on IDEAS
    24. Gabriel Felbermayr & Jasmin Katrin Gröschl & Marina Steininger & Gabriel J. Felbermayr, 2018. "Quantifying Brexit: From Ex Post to Ex Ante Using Structural Gravity," CESifo Working Paper Series 7357, CESifo Group Munich.
    25. Rafal Kierzenkowski & Nigel Pain & Elena Rusticelli & Sanne Zwart, 2016. "The Economic Consequences of Brexit: A Taxing Decision," OECD Economic Policy Papers 16, OECD Publishing.
    26. Gabriel Felbermayr & Rahel Aichele & Inga Heiland, 2016. "Going Deep: The Trade and Welfare Effects of TTIP Revised," ifo Working Paper Series 219, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    27. repec:oup:oxford:v:33:y:2017:i:suppl_1:p:s31-s44. is not listed on IDEAS
    28. repec:bla:worlde:v:42:y:2019:i:1:p:5-20 is not listed on IDEAS
    29. Lorenzo Caliendo & Fernando Parro, 2015. "Estimates of the Trade and Welfare Effects of NAFTA," Review of Economic Studies, Oxford University Press, vol. 82(1), pages 1-44.
    30. Rita Cappariello, 2017. "Brexit: estimating tariff costs for EU countries in a new trade regime with the UK," Questioni di Economia e Finanza (Occasional Papers) 381, Bank of Italy, Economic Research and International Relations Area.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Antoine Berthou & Sophie Haincourt & Marie-Elisabeth de la Serve & Ángel Estrada & Moritz A. Roth & Alexander Kadow, 2019. "Assessing the macroeconomic impact of Brexit through trade and migration channels," Occasional Papers 1911, Banco de España;Occasional Papers Homepage.
    2. Rodolfo Campos & Jacopo Timini, 2019. "An estimation of the effects of Brexit on trade and migration," Occasional Papers 1912, Banco de España;Occasional Papers Homepage.

    More about this item

    Keywords

    Brexit; trade; integration; EU;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbb:reswpp:201901-366. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/bnbgvbe.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.