Assessing the business costs of Brexit for both the EU27 and the UK hasn't been easy. A consulting firm and a law company have done exactly that, finding that the financial burden on all sides concerned will be huge.
In a unique assessment of the business costs of Brexit, management consulting company Oliver Wyman and law firm Clifford Chance partnered to highlight the impact of tariffs and non-tariff barriers on companies in the EU27 and the UK as they approach a standard, post-Brexit WTO trading relationship.
The study estimates that the direct costs of Brexit will total around $43 billion (€34.9 billion) for EU exporters and around $37.4 billion for British exporters.
The survey focuses on direct impacts and does not include any additional effects stemming from migration, pricing changes or third-country free trade agreements.
According to the study, the automotive sector will be hit hardest in the EU27, although country-level differences will vary considerably.
In Germany, four of its 16 states — Bavaria, North Rhine-Westphalia, Baden-Württemberg and Lower Saxony — will shoulder around 70 percent of direct impacts as a result of exports to the UK and based on their leading positions in the automotive and manufacturing sectors.
In Britain, the financial services sector is expected to take the biggest hit by far, incurring about one-third of the extra red tape costs. There will also be significant impacts on other industries and firms highly integrated in the European supply chain.
The study emphasizes the need for companies to face the difficulties ahead, saying that firms have to think through the impact on different levels: operations, supply chains, customers and competitors.
"Failing to prepare is preparing to fail," said Jessica Gladstone, partner of Clifford Chance. But she added that "given the difficulty of knowing exactly what turbulence lies ahead, many businesses are putting Brexit in the 'too hard' box."