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January 18, 2019 www.intellinews.com I Page 3
will especially resonate with Central Europe. Here European supply chains will be questioned and
to a lesser extent the free movement of people and its impact on remittances from the UK. Brexit will also draw attention to the 2021-27 EU budget round, where the loss of the UK’s contribution will be painful.”
Severe disruptions to trade are expected, espe- cially in the agriculture, automotive, textiles and retail sectors that dominate the CEE region’s trade with the UK. “After the Netherlands, it is
the Czech Republic, Poland and Hungary with the largest relative exposures to UK demand. While these exposures are still relatively small in GDP terms, they do centre on a few key industries such as the auto sector, agriculture and textiles, as well as services,” ING’s research finds.
A report by the European Committee of the Re- gions delves deeper into which industries, regions and cities are likely to be worst hit by the UK’s withdrawal from the EU. Its exposure index is based on trade flows in six key economic sectors: Transport Vehicles, Machinery, Electronics, Textile and Furniture, Vegetables, Foodstuff and Wood, Chemical and Plastics.
Romania’s Vest development region in the west- ern corner of the country that has emerged as
a hub for the automotive industry is one of the four regions likely to be severely affected in the transport vehicles sector. Vest along with Zá- padné Slovensko region in Slovakia and Strední Morava region in the Czech Republic would be severely affected in the electronics sector too. The Czech Republic’s machinery sector is also singled out. Brexit could reduce Czech GDP by up to CZK55bn (€2.1bn), or by 1.1%, according to the analysis by the bank Ceska Sportelna released
in November. Brexit could also lead to layoffs of up to 40,000 employees in Czechia and have a significant impact on automotive, electronics and machinery industries.
Elsewhere in the EU, Bulgaria’s Severozapaden region is one of the four most exposed in the tex-
tiles and furniture sector. And in the Vegetables, Foodstuff and Wood category, Latvia together with Ireland is the most exposed smaller country.
“In general, the situation varies across EU re- gions,” says the report, but adds that, “There is no clearly identified ‘winner’.”
Meanwhile, a November 2018 report from the Eu- ropean Bank for Reconstruction and Development (EBRD) forecasts that a no-deal Brexit would
hit the Southeast European economies hard-
est among the EBRD regions. “Cumulatively, the economic impact of a no-deal Brexit is projected to be largest for economies of south-eastern Eu- rope, mainly through disruption to trade linkages encompassing the UK and other advanced econo- mies in Europe, the impact on the EU accession reform momentum and a reduction in the EU structural and cohesion funds,” said the EBRD’s latest Regional Economic Prospects report.
This goes beyond EU member states from the region; the EBRD warns that a no-deal Brexit “might also weaken perceived prospects of EU accession for candidate and potential candidate countries. A slower reform momentum would then weigh on growth”. Until recently, the UK had been an advocate of EU enlargement eastwards.
Budget constraints
Then there is the impact of Brexit — whether managed or not — on the EU budget. As one of the largest net contributors to the EU budget, the UK’s departure will inevitably be felt, especially by major recipients of structural funding.
“On the money side, the UK had been funding around 6% of the EU’s budget. This contribution will disappear for the 2021-27 round,” ING ana- lysts wrote. “However, the indirect impact of the UK’s departure may be larger. The EU average GDP per capita level will drop after Brexit, propel- ling the likes of the Czech Republic and Poland above key financial thresholds. EU funding for CE4 economies could drop by anywhere between 12% and 24% in real terms.”