Ireland and Cyprus are the most exposed EU countries from a trade perspective after Brexit, according to the PwC`s recent monthly edition of “Global Economy Watch”.
According to the organisation, London, as a leading international business hub, is faced with the challenges of a possible loss of the passport regime, while at EU level, Ireland and Cyprus are the member states with the most potential of being negatively impacted due to their high exposure, on a commercial level, to the United Kingdom.
PwC’s analysis identifies the 10 EU countries that export the most to the UK, relative to the size of their economies. Ireland (19.9%) and Cyprus (9.5%) sit at the top of this list. Of the larger European economies, Germany exports the most to the UK relative to the size of its economy (3.7%). France (2.5%) and Italy (1.7%) don’t rank within the top 10.
`These numbers are relatively modest at the macroeconomic level but could be more material for some industry sectors, so affected businesses in these economies do need to be prepared for different trade arrangements in the future` it is noted.
According to Richard Boxshall, senior economist at PwC, “trade agreements are complex and generally take many years to negotiate, but given the high level of integration that has been built up between UK and EU markets, it is unlikely it would be allowed to fall away completely”.
“Businesses need to put the case to governments to make early progress in putting such trade deals in place in a way that is mutually beneficial to businesses in both the UK and other EU countries. But, in the interim, they need to make contingency plans for a range of different outcomes.”, he added.
Following the vote to leave the EU, the UK economy is expected to face challenges in the short term, with high levels of uncertainty leading to a slowdown in business investment and lower GDP growth. In light of this, PwC has revised down its main scenario real GDP growth projection for the UK to 1.6% and 0.6% per annum in 2016 and 2017 respectively, down from 1.9% and 2.3%. Quarter-on-quarter growth could fall to around zero in the last quarter of this year and the first quarter of 2017, but the UK would narrowly avoid a recession. Growth would then gradually pick up later in 2017 and beyond.