## The Long-Term Impact of Brexit on the European Union

_IMF Blog, August 10, 2018_

## Source details

**Canonical URL:** [The Long-Term Impact of Brexit on the European Union](https://www.imf.org/en/blogs/articles/2018/08/10/blog-the-long-term-impact-of-brexit-on-the-eu)

## Other formats

- [Markdown version](/en/blogs/articles/2018/08/10/blog-the-long-term-impact-of-brexit-on-the-eu/index.md)
- [Structured JSON version](/en/blogs/articles/2018/08/10/blog-the-long-term-impact-of-brexit-on-the-eu/index.json)
- [Bundle manifest](/en/blogs/articles/2018/08/10/blog-the-long-term-impact-of-brexit-on-the-eu/bundle-manifest.json)

## Bibliographic details
- Authors: Jiaqian Chen, Christian Ebeke, Li Lin, Haonan Qu, Jesse Siminitz
- Published: August 10, 2018

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### Overview
- Authors: Jiaqian Chen, Christian Ebeke, Li Lin, Haonan Qu, Jesse Siminitz
- Publication date: August 10, 2018
- Core message: Reversing deep EU–UK economic integration will reduce long-term output and employment in the EU-27; the magnitude depends on the final post-Brexit relationship.

### Channels of EU–UK integration highlighted
- Trade:
  - The U.K. accounts for about 13 percent of the EU-27’s trade in goods and services.
  - Substantial supply chain trade links between the EU-27 and the U.K. involve several countries.
- Capital flows:
  - Gross bilateral capital flows totaled around 52 percent of EU-27 GDP in 2016.
- Migration:
  - Migration flows have grown over time and are very large for some countries, such as Ireland.
- Composite indicator:
  - A constructed index capturing all these channels indicates growing EU–UK bilateral integration over the past 30 years.

### Aggregate long-term impact under alternative scenarios
- FTA (standard free trade agreement: low tariffs on goods but higher non-tariff barriers):
  - EU-27 real output: lower by 0.8 percent in the long run relative to a no-Brexit scenario.
  - EU-27 employment: lower by 0.3 percent in the long run relative to a no-Brexit scenario.
- WTO rules (default to World Trade Organization rules):
  - EU-27 real output: lower by 1.5 percent in the long run relative to a no-Brexit scenario.
  - EU-27 employment: lower by 0.7 percent in the long run relative to a no-Brexit scenario.
- “Norway” (EEA) scenario (access to the single market preserved; membership in the customs union lost):
  - Decline in output and employment for the EU-27: appears negligible.

### Country-by-country estimates from trade-channel model
- Model scope: country-specific framework capturing direct and indirect trade effects from higher tariffs and non-tariff barriers for goods and services. Results are relatively smaller than aggregate estimates because only trade links are modeled.
- FTA scenario (long run, relative to no-Brexit):
  - EU-27 real output: lower by 0.2 percent.
  - Largest country hit: Ireland — about 2.5 percent lower compared to the no-Brexit scenario.
  - Other notably affected countries: the Netherlands, Denmark, Belgium, and Czech Republic (ranked after Ireland by size of impact).
- WTO rules scenario (long run, relative to no-Brexit):
  - EU-27 real output: lower by 0.5 percent.
  - Ireland: output loss of 4 percent given substantial increases in both tariff and non-tariff barriers.

### Scope and limitations noted by the study
- Focus: the study focuses entirely on the long-term impact after full adjustment to the new relationship.
- Exclusions:
  - The study does not analyze the effect of uncertainty about the future relationship between the EU-27 and the U.K.
  - The study does not analyze the transitional dynamics during the move to the new relationship.
- Timing: The ultimate consequences will take years to materialize and will depend on the eventual deal between the EU-27 and the U.K.

*Source: The Long-Term Impact of Brexit on the European Union, August 10, 2018*

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## Content in this bundle

- **Country Report**
  - [Country Report (Markdown version)](/-/media/files/publications/cr/2018/cr18224.pdf.md){rel="alternate" type="text/markdown"}
  - [Country Report (PDF)](/-/media/files/publications/cr/2018/cr18224.pdf){rel="external" type="application/pdf"}

---

## References

- [Português](https://www.imf.org/pt/News/Articles/2018/08/09/blog-the-long-term-impact-of-brexit-on-the-eu)
- [https://www.imf.org/wp-content/uploads/2018/08/BLOG-1024x600-EUR-blog-containor-exports-ships-Gerard-Bottino-Crowd-spark-Newscom-nzphotos080635.jpg](https://www.imf.org/wp-content/uploads/2018/08/BLOG-1024x600-EUR-blog-containor-exports-ships-Gerard-Bottino-Crowd-spark-Newscom-nzphotos080635.jpg)
- [https://www.imf.org/wp-content/uploads/2018/08/eng-august-1-brexit2-1.png](https://www.imf.org/wp-content/uploads/2018/08/eng-august-1-brexit2-1.png)
- [https://www.imf.org/wp-content/uploads/2018/08/eng-august-1-brexit3-2.png](https://www.imf.org/wp-content/uploads/2018/08/eng-august-1-brexit3-2.png)
- [UK economy must get more efficient](http://www.imf.org/en/News/Articles/2018/02/08/na021418-uk-economy-must-get-more-efficient)
- [UK Article IV](http://www.imf.org/en/Publications/CR/Issues/2018/02/13/United-Kingdom-2017-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-45627)
- [UK and the IMF](http://www.imf.org/en/Countries/GBR)
- [Brexit and the city](https://blogs.imf.org/2017/05/29/chart-of-the-week-brexit-and-the-city/)

_Source: https://www.imf.org/en/blogs/articles/2018/08/10/blog-the-long-term-impact-of-brexit-on-the-eu_