Brexit and Central Europe

When, or perhaps if, Britain leaves the European Union there will be implications for Central European economies, businesses and people.  Britain and the EU will no doubt try to mitigate the impact of Brexit, be it hard or soft, quick or protracted, but the outlook is far from rosy.

In a report on Brexit and Central Europe called ‘Who and what is at risk’ ING Bank of the Netherlands noted: “The UK had been funding around 6% of the EU’s budget. This contribution will disappear for the 2021-27 round.  However, the indirect impact of the UK’s departure may be larger.  The EU average GDP per capita level will drop after Brexit, propelling the likes of the Czech Republic and Poland above key financial thresholds.  EU funding for CE4 economies [Czech Republic, Hungary, Poland, Slovakia] could drop by anywhere between 12% and 24% in real terms.”

The European Bank for Reconstruction and Development (EBRD) has also looked at Brexit.  The reintroduction of a customs border between Britain and the EU will lower UK demand for EU exports of finished goods, it says.  Slovakia and Hungary have exports to the UK with an estimated domestic value added of 1.5% to 3% of GDP, mainly in the automotive and machinery sectors.  Poland and Lithuania also have sizable exports of food products, worth up to 2% of GDP.  Indirectly, lower exports from Europe’s advanced economies to the UK will, in turn, affect demand for imports of intermediate goods from the EBRD regions.  Lower purchasing power in the UK will further affect the UK’s demand for imports (the National Institute of Social and Economic Research estimated annual real incomes in the UK to be around £800 per person lower than in a no-Brexit scenario).  Download the full report here.

The Guardian spoke to business people in Poland, Slovakia, Bulgaria and Croatia.

And the London newspaper Metro has a first-person account of how Brexit has emboldened xenophobes.

Employment related to value-added exports to Britain; ING.