Brexit has caused much discussion and deliberation in the recent past between government and countries in global trade with the United Kingdom, investors, and even stock exchanges to name a few. Brexit concerns the United Kingdom’s European Union referendum and it’s exit from the EU, which has affected trade between the United Kingdom and the European Union. If we are to look at global trade and the consequences of Brexit, we also need to understand the current trade flows that occur between Great Britain and EU countries. In this blogpost, we reflect the past and look to the future of global trade after Brexit.
European Unions’ Single Market and Trade
Countries within the European Union have greatly benefitted from the EU’s Single Market; absence of duty and quotas for all EU member states that also extends to free movement of people for access for workers and services. The Single Market policy also reduces customs procedures for less burdened transactions within the EU.
Global Trade with the EU
The likes of Belgium, Netherlands, and Germany have been impacted the most with regards to Brexit, with its past global trade statistics, as these countries as their exports to UK greatly outweighs their imports from UK. With them included in the top 10 UK trading partners, within the seven EU member state countries, it is evident that a global trade will indeed be impacted. In the year 2015, 44% of the United Kingdom’s export trade was directed within the EU, with 53% of imports also originating with EU Member States. With Brexit, it is evident of the underlying impact that will be felt by these countries and how opportunities may arise for others in global trade.
The following charts courtesy of PriceWaterCoopers, showcases the statistics of export and import trade with the United Kingdom in 2015. Furthermore, post-Brexit the price elasticity of exports may be privy to trade agreements falling through, which may in turn increase cost of trade between the likes of the UK and the rest of the EU member states.
There are few countries within the EU that looks to the UK for its trade volume, as the below chart states.
- Ireland : The economy strongly relies on its export trades, and 14% of them are to the UK, with 34% of imports originating from the UK as well. With Brexit, costs will spike with concern to customs clearances, duties and quotas. However, one benefit from Brexit would be the investment opportunities from other foreign markets and locations.
- Netherlands : Being the United Kingdom’s 2nd largest trading partner within the EU (volumes and ratio of imports/exports), the main factor would be the Euro vs Pound differentials with current investments.
- Belgium : With 9% of its export going to the United Kingdom, the terms of export in relation to the Belgian economy size will be a factor, especially with 5% of imports originating from the UK.
Germany: Similarly, German exports will take more of a hit than its imports and not to mention the terms that have been facilitated via the Single Market policy.