Rising trade costs in both Britain and the other 27 EU countries mean that Brexit will cause considerable economic damage. In Britain this damage will exceed any savings made on its net contribution to the EU budget. If future trade were to be conducted on the basis of WTO rules, this would still cost Britain an annual 16 billion euros, even if it were to pay nothing into the EU budget. For the EU, the losses generated by the absence of a net contribution from Britain and rising trade costs amounts to around 44 billion euros per year. “Everyone stands to lose out from Brexit,” said ifo President Clemens Fuest citing a paper published by the European research network EconPol, which is coordinated by the ifo Institute.
“A free trade agreement could more than halve the additional costs arising from constraints on trade,” added Fuest. The EU’s total losses would drop to 27 billion euros, while for Britain its savings on contributing to the EU budget would more or less offset rising trade costs. “Negotiations consequently need to focus on minimising economic losses through trade barriers and a comprehensive free trade agreement,” noted Fuest.