A no deal Brexit will mean annual welfare losses of €42m in Cyprus — equivalent to €49 per capita while in the case of an orderly Brexit, the losses will be a much lower €23m or €27 per capita according to a study by the Germany think tank Bertelsmann Stiftung
The think tank evaluated the impact of a soft and a hard Brexit on productivity, markups, product variety, welfare and the distribution of population across European countries and regions.
It employed a model characterised by costly trade, love of variety, heterogeneous firms, labour mobility as well as endogenous markups and productivity and quantified the model using goods and services trade data as well as GDP and population for EEA countries/regions plus BRIC countries and other OECD countries.
And it computed, starting from the observed initial situation in the year 2016, counterfactual economic changes stemming from changes in trade costs related to the implementation of both a soft and a hard Brexit.
“We find that Brexit would have a significant impact on the UK and EU economies. A hard Brexit could lead to annual welfare losses of €57 billion in the UK and about €40 billion in other EU countries,” it said.
In Germany, too, the loss of income due to a hard Brexit would be high at around €10 billion per year. This would make the loss of income in Germany the highest in Europe, after the UK. France and Italy would also see significant income losses amounting to billions of euros. Per capita, Ireland will be the biggest loser at €726.
The study also shows that some countries outside Europe could benefit from Brexit. According to the simulations, US incomes would benefit from a hard Brexit and could rise by around €13 billion annually.
In China, incomes would rise by around €5 billion annually, in Russia a slight increase of around €260 million annually would be expected due to Brexit.
