Policy brief

The implications of no-deal Brexit: is the European Union prepared?

The author, based on a note written for the Bundestag EU Committee, is exploring the possible consequences of a no-deal Brexit for the EU, assessing p

Publishing date
14 January 2019

This Policy Contribution, based on a note written for the Bundestag EU Committee, explores the possible consequences of a no-deal Brexit for the European Union and assesses preparations on the EU side. It also provides guidance on the optimal strategy for the EU, depending on the choices made by the United Kingdom.

Overall, a no-deal Brexit would be disruptive in the short-term:

  • There would be immediate very significant administrative and logistical challenges in trade. Preparations to reduce those disruptions are underway but are unlikely to be sufficient. But while Most-Favoured Nation tariffs will affect some sectors significantly, the macroeconomic effect on the German economy might not be huge.
  • If the UK fails to honour its financial commitments to the EU, about €16.5 billion would be missing for the remainder of the current EU budgetary period. The gap could be filled thanks to the existing ‘own resources’ ceiling. The overall missing ‘Brexit bill’ would amount to about €45-50 billion.
  • Not honouring financial commitments would be considered by the EU as akin to default and would likely lead to an uncooperative no-deal Brexit. It would be more disruptive than a cooperative no-deal Brexit, in which the EU and the UK cooperate on a number of pressing emergency files.
  • The European Commission has issued a number of draft regulations to mitigate the effects of a no-deal Brexit, including on issues such as aviation and visas. These are comprehensive but would not offset the effects of a no-deal Brexit, which would be highly disruptive in some sectors.

The effects of a no-deal Brexit in the medium to long term are difficult to assess. A no-deal Brexit would lead to deterioration in long-term political relationships, which would make a new trade arrangement and other cooperation in the future less likely.

A specific concern is the situation in Ireland, which is also the most contentious part of the Brexit negotiation. If the EU wants to protect the integrity of its single market, a no-deal Brexit will mean the imposition of customs controls on the Irish border. The European Commission’s draft legislation aims to preserve the peace process, but a hard border could provoke renewed violence.

The overall strategic direction the EU should take would be to increase the cost to the UK of a no-deal Brexit as much as possible (respecting ethical limits), while showing more flexibility over the political declaration and possibly the withdrawal deal itself.

About the authors

  • Guntram B. Wolff

    Guntram Wolff was the Director of Bruegel. Over his career, he has contributed to research on European political economy and governance, fiscal, monetary and financial policy, climate change and geoeconomics. Under his leadership, Bruegel has been regularly ranked among the top global think tanks and has grown in influence and impact with a team of now almost 40 recognized scholars and around 65 total staff. Bruegel is also recognized for its outstanding transparency.

    A recognized thought leader and academic, he regularly testifies at the European Finance Ministers' ECOFIN meeting, the European Parliament, the German Parliament (Bundestag) and the French Parliament (Assemblée Nationale). From 2012-16, he was a member of the French prime minister's Conseil d'Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed to the G20 high level independent panel on pandemic prevention, preparedness and response. He is also a professor (part-time) at the Solvay Brussels School of Université Libre de Bruxelles, where he teaches economics of European integration.

    He joined Bruegel from the European Commission, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission, he was coordinating the research team on fiscal policy at Deutsche Bundesbank. He also worked as an external adviser to the International Monetary Fund.

    He holds a PhD in economics from the University of Bonn and studied in Bonn, Toulouse, Pittsburgh and Passau. He taught economics at the University of Pittsburgh and at Université libre de Bruxelles. He has published numerous papers in leading academic journals. His columns and policy work are published and cited in leading international media and policy outlets. Guntram is fluent in German, English, French and has good notions of Bulgarian and Spanish.

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