ifo Institute: Brexit Hits UK Trade Harder than EU Trade

Brexit will hit the UK harder than the EU, according to an ifo Institute evaluation of trade figures between the two. These show that the EU’s share of the UK’s trade is much larger than the other way around. The same is true for products of which there are only a few suppliers. “Brexit means both sides lose, but the United Kingdom loses considerably more. It is in both parties’ interests to have a trade agreement in place as of January 1,” says Lisandra Flach, Director of the ifo Center for International Economics.

In 2019, the EU27 was the source of 50 percent of the United Kingdom’s imports and the destination for 47 percent of its exports. This makes the EU the largest market for the United Kingdom. For the EU27, however, the UK is much less important: in 2019, only 4 percent of the bloc’s exports went there and 6 percent of its imports came from there.

The picture is similar for products with only one to five suppliers, which are therefore more difficult to replace. For the UK, 64 percent of these products come from the EU, while for most EU countries, the share of these products from the UK is only 2 to 7 percent. Outliers on the upper end of this scale are Cyprus with 10 percent, Malta with 10 percent, and Ireland with 30 percent. “In all European countries, only a few goods are highly dependent on imports from the United Kingdom. This means the increase in trading costs due to Brexit will have a much smaller impact on companies in the EU27 than is expected for their UK counterparts,” Flach says.

The ifo researchers went into even more detail and found out that Germany sources only nine goods exclusively from the UK, which together account for less than 0.001 percent of the value of total German imports (in euros). The nine goods that are wholly dependent on the UK are organic chemical products, animal and vegetable fats and oils, and one for each of the following uses: photographic or cinematographic purposes, nuclear reactors, boilers, machinery, apparatus, and mechanical appliances. All nine goods are classified as intermediate products.

Conversely, full dependence on one country of origin further increases the risk of adverse shocks to the United Kingdom. For example, the UK imports 53 goods exclusively from Germany, of which around 77 percent are intermediate products. Most of them are organic chemical products.