As expected, the EU and the UK reached a very last-minute compromise on Brexit. In order to give all stakeholders the time to adapt, a transition period until the end of June has been agreed by the UK for imported goods.
3 questions for Ana Boata, Head of Macroreconomic Research at Euler Hermes.
Ana Boata: The transition period should enable European exporters to limit losses. According to our latest forecasts, European exports to the UK will contract by nearly EUR10 billion in 2021. The biggest losses will be for Germany, with export losses reaching EUR2 billion, ahead of the Netherlands (-1.2 billion), France (-0.9 billion) and Belgium (-0.7 billion). A real impact, but less heavy than previously expected, representing less than 0.5% of the exports of the affected countries.
Ana Boata: We expect the losses for British exporting companies at up to EUR27 billion in 2021 due to weak demand, increased red tape and the depreciation of the pound sterling (2021 forecast: -3%). At its strongest impact, this is equivalent to a 1.1 point loss in GDP growth for the UK. The top five hardest-hit sectors would be mineral and metal products, machinery and electrical equipment, transport equipment, chemicals and textiles.
Ana Boata: We think that the Covid-19 crisis will "lessen" the consequences of Brexit because of the sanitary restrictions (expected drop in trade), the rule of origin (limitation of international trade and more local supply chains), a limited price increase of British imports and a direct impact on the British job market (labour shortage favouring local jobs). Covid-19 gives the British authorities some leeway to absorb Brexit's negative impact on public opinion. Brexit or not, agreement with the EU or not, the United Kingdom would in any case have experienced a pronounced recession in the first quarter of 2021 due to the pandemic. However, the country's economic situation is expected to recover in line with the British comparative advantage in the vaccination campaign and the return of confidence, with growth expected to be 2.5% in 2021 and 7% in 2022.
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