In less than a month, the British will vote for staying in the EU. The event is considered one of the most important of 2016 and analysts are racing to outline the possible scenarios that will follow. Everyone is asking: what can happen if the UK decides to leave the EU?
The question of the exit of UK from the EU, the so-called Brexit, is becoming more intense and open debate among politicians, market operators and analysts. Thus began to emerge various scenarios about what may lead the Brexit both for the UK and for the EU.
On June, the 23rd, British people will vote about the permanence or not of their country in the European Union. In England, the debate is very heated and has seen the involvement of various politicians, international and national institutions as well as rating agencies.
The International Monetary Fund, the rating agencies and the Bank of England, have sided against the UK out of the EU by warning of the possible risks. Boris Johnson, on the other hand, ex-mayor of London, is one of the most vocal supporters of Brexit.
David Cameron, who is part of the same Johnson’s party, is instead doing everything is possible to convince more and more citizens to vote in favor of staying in the EU. The British Prime Minister, in case of victory for the ‘No’, will be probably forced to resign because he has promoted the referendum after he tried to redefine the existing agreements with EU.
There is no clarity about the effects of an exit of the United Kingdom from the European Union, yet the event was inserted by the Economist into the top 5 of the possible catastrophic scenarios for the markets.
What would be the impact of the exit of the United Kingdom by the European Union? Several analysts, business men and banks have sought to have their say even if, as highlighted by the English Parliament, he knows what cannot happen economically.
According to a study by the Bertelsmann Stiftung in collaboration with the Ifo Institute in Monaco, the Brexit could cost British taxpayers about 313 billion with GDP down by 14% over 12 years.
Bertelsmann reports analyzed the effects on various sectors of the British economy. A Brexit might annoy the EU countries that may decide to regulate in a tough way the exchanges with the United Kingdom. Such a move would affect different sectors of the British economy and for each one of them would have more or less dramatic effects.
The financial sector would lose 5% and could grow heavy if many of the financial institutions based in London will decide to move their headquarters in another city, for example the European financial capital Frankfurt.
The chemical sector will suffer more, with losses estimated at 11%. Other sectors, like automotive and mechanical engineering would be burdened too.
In contrast, for the remaining EU countries, the Brexit would have a far less significant impact but incisive.
By reference to Germany, the strongest economy in the EU, the study shows very different figures. The German country, decreasing trade with the UK, could burn from a minimum of 8.7 billion euro of GDP to a maximum of 58 billion. In per capita terms, the loss range would be between 100 and 700 euro.
The sectors most affected would be the automotive with losses estimated at around 2%, the electronics, the steel and the food. However, this study does not take into account the Volkswagen scandal that could now cost 1.1% of German GDP.
Also, to compensate the lack of contributions to the European budget by the United Kingdom, Germany alone would have to pay 2.5 billion euro more than what has already been poured.
The departure of the United Kingdom could trigger also the dormant exit ideas of other EU countries, such as Spain, Portugal, Greece and Italy who are tired of the austerity policies that have lasted for years.
Currently, the risk Brexit has a predominantly political character. If anything would materialize, to see the economic effects, we will have to wait two or more years.