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Economic Effects of Brexit on the European Economy

Author

Listed:
  • Gabriel Felbermayr
  • Clemens Fuest
  • Jasmin Katrin Gröschl
  • Daniel Stöhlker

Abstract

On 29 March 2017, the UK Government notified its exit to the EU in accordance with Article 50 of the EU Treaty. Brexit is therefore officially initiated. On 29 April, the Heads of State and Government of the European Council adopted the guidelines for negotiations between the EU and the UK in accordance with Article 50 TEU. Negotiations between the EU27 and the UK on the important issues of exit and discussions on future political and economic relations between the EU27 and the UK have begun in July 2017 and have proven difficult since then. Of course, the two stage structure suggested by the EU makes an agreement difficult precisely because the appropriate side payments will depend on the agreement about future economic relations. In this note, Clemens Fuest, Gabriel Felbermayr, Jasmin Groeschl and Daniel Stöhlker wish to provide some empirical foundations for the political process. First, they characterize the value chains that tie the UK and the EU together. Second, they identify how the different goods and services sectors have benefitted from the UK's membership in the EU Single Market and Customs Union. These benefits – on both the UK and the EU side – are now at risk due to Brexit. Third, they simulate different scenarios, utilizing the ifo trade model, to quantify the consequences of Brexit for the UK and EU countries. The study uses increasingly complex models to meet the above objectives.

Suggested Citation

  • Gabriel Felbermayr & Clemens Fuest & Jasmin Katrin Gröschl & Daniel Stöhlker, 2017. "Economic Effects of Brexit on the European Economy," EconPol Policy Reports 4, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:econpr:_4
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    2. Iuliana MÎNĂSCURTĂ, 2019. "The European Union. Brexit – Causes and Consequences," Journal of Mediation & Social Welfare, Editura Lumen, vol. 1(1), pages 42-49, December.
    3. Catherine Mathieu, 2020. "Brexit: what economic impacts does the literature anticipate?," Post-Print hal-03403036, HAL.
    4. Ana Venâncio & João Pereira dos Santos, 2021. "The effect of Brexit on British workers living in the EU," Working Papers REM 2021/0197, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    5. Gabriel Felbermayr & Robert Lehmann & Marina Steininger, 2018. "Brexit and its Economic Consequences for the German State of Hesse," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 93.
    6. Jannik André Nauerth & Joachim Ragnitz & Michael Weber, 2018. "ifo Konjunkturprognose Ostdeutschland und Sachsen 2017/2018: Ostdeutsche Wirtschaftwächst langsamer als die westdeutsche," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 25(01), pages 22-28, February.
    7. Timo Wollmershäuser & Silvia Delrio & Clemens Fuest & Marcell Göttert & Christian Grimme & Carla Krolage & Stefan Lautenbacher & Robert Lehmann & Wolfgang Nierhaus & Andreas Peichl & Magnus Reif & Rad, 2017. "ifo Konjunkturprognose 2017–2019: Deutsche Wirtschaft auf dem Weg in die Hochkonjunktur," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(24), pages 28-81, December.
    8. Lisandra Flach & Feodora Teti & Lena Wiest & Margherita Atzei, 2020. "EU27 and the UK: Product Dependencies and the Implications of Brexit," EconPol Policy Brief 32, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    9. Cardoso, Miguel, 2020. "The welfare impact of migration with endogenous cross-border movement: An application to the European Union," Economic Modelling, Elsevier, vol. 93(C), pages 205-216.
    10. Catherine Mathieu, 2020. "Brexit: what economic impacts does the literature anticipate?," SciencePo Working papers Main hal-03403036, HAL.
    11. Patrick Bisciari, 2019. "A survey of the long-term impact of Brexit on the UK and the EU27 economies," Working Paper Research 366, National Bank of Belgium.
    12. Banse, Martin & Freund, Florian, 2018. "Mögliche Auswirkungen eines harten oder weichen Brexit auf die deutsche Landwirtschaft - Update," Thünen Working Papers 95, Johann Heinrich von Thünen Institute, Federal Research Institute for Rural Areas, Forestry and Fisheries.
    13. Halmai, Péter, 2020. "A dezintegráció gazdaságtana. A brexit esete [The economics of disintegration. The case of Brexit]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 837-877.
    14. repec:hal:spmain:info:hdl:2441/2jt9boop748r0ql0k1lmshm5ou is not listed on IDEAS
    15. Maria Nica & Ionut Laurentiu Petre, 2018. "A smaller union, a larger budget per member state," International Conference on Competitiveness of Agro-food and Environmental Economy Proceedings, The Bucharest University of Economic Studies, vol. 7, pages 240-248.
    16. Rolf J. Langhammer & Lisandra Flach & Feodora Teti & Lena Wiest & Margherita Atzei & Lisa Scheckenhofer & Joachim Wuermeling & Carsten Hefeker & Friedemann Kainer & Philipp Harms & Michael Kaeding, 2020. "Brexit-Finale: Das letzte Ringen um einen Deal," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 73(12), pages 03-27, December.
    17. Freund, Florian & Banse, Martin & Pelikan, Janine, 2018. "Losing Preferential Access to Third Countries after Brexit - What is at stake?," Conference papers 330186, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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