If the UK leaves the EU without putting a new Free Trade Agreement (FTA) in place, British exporters could suffer significant losses according to a report from trade credit insurance provider Euler Hermes.
The warning comes as David Cameron enters the latest phase of his EU reform negotiations.
There is currently no indication of whether any deal achieved by the Prime Minister would be sufficient to satisfy those in his own party and elsewhere who want Britain to exit the EU – the so-called Brexit option.
In that context, the report Brexit me if you can (available at www.eulerhermes.com) considers the impacts of three scenarios on UK firms.
In the first, the UK stays in the EU, disruption to trade is minimised and exports continue to grow by as much as £26 billion by 2019. Turnover of UK firms would, it is suggested, grow by 4% on average after 2017.
The second option considered is for the UK to leave the EU and to conclude an FTA with the Union as well as bilateral agreements with non-EU countries. This option would see turnover grow at 2%.
In the third scenario, Brexit happens without a UK-EU FTA being agreed. This could result in losses of up to £30 billion or 8% of UK total goods exports, Euler Hermes warns.
Even when offset by trade with Commonwealth countries, the gap would take at least a decade to fill, its report argues. Under this worst case scenario, the trade balance deficit would quickly widen by £35 billion and turnover for British firms would contract by an average – 1% per year.
As Ana Boata of Euler Hermes said: “Our forecasts paint a dismal picture for British businesses in a world outside of the EU.”
