The Brexit debate in the UK has tended to revolve around how important EU membership is to the UK economy, but what is rarely discussed is how important the UK is to the EU economically and what the EU is losing.
Economically the UK is the 6th largest economy in the world, the 2nd largest in Europe and the 2nd largest in the EU, only Germany is larger.
GDP wise the UK is pretty much the same size as France, over the past few decades sometimes the UK’s GDP is bigger than France and other times France’s GDP is bigger than the UK, but the difference in GDP isn’t very much.
EU Economies GDP
You can see in the table below listing the GDP of all EU28 countries in 2018, economically there’s a few big players: German, UK, France and Italy, after that the EU countries GDP compared to the UK are relatively small.
The UK’s GDP is twice the size of Spain, three times the size of the Netherlands, five times the size of Sweden, Poland and Belgium. These relative comparisons are rarely discussed during the Brexit debate.
|Rank||Country||2018 GDP $|
Despite what the Remain supporting media reports the UK is still a BIG economy and as such is very important to the EU economically.
The UK economy is in fact in GDP terms equal in size to these 18 EU economies: Ireland, Denmark, Finland, Czech Republic, Romania, Portugal, Greece, Hungary, Slovakia, Luxembourg, Bulgaria, Croatia, Slovenia, Lithuania, Latvia, Estonia, Cyprus and Malta.
You can see in the image above, the UK (in blue) economically is equal to a lot of EU countries economies (in red).
How would this impact the EU economically if all 18 of those countries left the EU on the same day and the EU didn’t manage to negotiate a free trade agreement (FTA) by the end of the Article 50 process!
If things don’t change that could happen with the UK leaving the EU with no Article 50 agreement meaning no EU-UK FTA, EU27 to UK trade and UK to EU27 trade reverts to WTO terms.
That means higher overall tariffs and more trade barriers, this won’t STOP all EU/UK trade, but it will have a negative impact, trade is likely to decrease between the EU27 & UK: how much is an unknown quantity.
What has been missed in the Brexit debate is how important trade between the EU/UK is from BOTH sides, we’ve tended to only hear one side, the Project Fear side: it will be a cliff edge disaster for the UK, the economy will free fall into oblivion worse than the great recession!
It’s OTT scaremonger, no credible economists are making dire predictions like this, but if it was true, it will also be an economic disaster for the EU27 since overall they export more in £ terms to the UK than the UK exports in £ terms to the EU27.
UK and EU Trade in Absolute £ Terms
In 2017 the EU27 exported £341 billion of goods and services to the UK, while the UK exported £274 billion of goods and services to the EU27.
That’s a £68 billion difference, the EU27 benefits more than the UK in absolute £ terms from trade.
It’s worth repeating.
The EU27 exports £68 billion more to the UK than the UK exports to the EU27, trade is in the EU27’s favour, they have more to lose in absolute £ terms.
If the EU27 was one country AND the same size as the UK, the Leave campaign rhetoric “they (the EU) need us (the UK) more than we need them” would hold significant weight, but it’s not that simple.
UK and EU Trade in Percentage % Terms
In 2017 roughly 8% of EU27 exports of goods and services went to the UK, while 44%* of UK exports of goods and services went to the EU27.
The Rotterdam Effect: * It’s important to note this % is an overestimate. Some of the UK’s exports to the EU27 are destined for non-EU countries, but they first pass through the port of Rotterdam. The ONS predicted between 4% and 5% of UK exports to the EU27 are destined for non-EU countries, so rather than 44% it’s probably closer to 40% of UK exports of goods and services went to the EU27.
Even taking the Rotterdam effect into account, as a whole the EU27 exports to the UK in percentage terms is significantly lower than the UK’s exports to the EU27.
If the EU27 was one country AND the same size as the UK, the Remain campaign rhetoric “we (the UK) need them (the EU) more than they need us” would hold significant weight, but as covered earlier, it’s not that simple.
The reality is we need each other for trade and fortunately no matter what the outcome of Brexit that won’t change anytime soon. The UK and mainland Europe are connected by shared history that predates the existence of the EU by hundreds of years, that won’t change.
- The EU will still be part of Europe
- The UK will still be part of Europe post Brexit
- Trade will continue, just at a lower amount
- Cooperation will continue, but in a different way