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Red-tape cost of no deal Brexit? £58 billion says Oliver Wyman

Red tape

£58 billion — that will be the business cost of Brexit if the EU27 and the UK revert to a World Trade Organisation (WTO) trading relationship with each other, according to an assessment by Oliver Wyman and law firm Clifford Chance which calculates the impact of tariffs and non-tariff barriers.

  • The annual 'red tape', or tariff and non-tariff, costs of Brexit for EU27 exporters is around £31billion and for UK exporters is around £27billion even after initial steps to mitigate costs have been taken. This is proportionately 4 times larger for the UK as a percentage of Gross Value Added (GVA ).
  • 70 percent of the aggregate impact falls in just five sectors in both the EU27 and UK.
  • Disproportional impacts in specific regions such as Bavaria in Germany and London in the UK.
  • A future customs arrangement equivalent to The Customs Union reduces the EU27 impact to around £14billon and the UK impact to around £17billon. Mitigating the costs of Brexit are non-trivial and impacted firms need to be taking steps now. Small firms will be least able to mitigate these costs and in turn pose risks to their supply chain.

The 'red-tape' cost of Brexit estimates that the direct costs will total around £31billon for EU exporters and around £27billon for UK exporters, with non-tariff barriers accounting for more of the effect than tariffs.

Oliver Wyman's report focuses only on the direct impacts of the UK's exit from the EU which are of immediate importance to companies for Brexit planning. It does not model additional impacts such as migration, pricing changes or third country Free Trade Agreements, which are likely to increase the overall impact.

In the EU27 the hardest hit sector will be automotive, where the direct impact will be around 2 percent of current GVA.

Country level differences will vary considerably, with Ireland's agricultural sector's exposure to UK consumers, for example, a particular pinch point. In Germany, four of the sixteen states — Bavaria, North Rhine-Westphalia, Baden -Wuerttemberg, and Lower Saxony — will shoulder around 70 percent of the country's direct impacts as a result of exports to the UK that arise from their leading global positions in automotive and manufacturing.

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