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Hard Brexit will cost Bavaria’s economy over a billion Euros per year

This is the press release for Ifo Institute:

A hard Brexit would diminish the production of the Bavarian economy by around 1.4 billion euros per year, according to a study by the Ifo Institute commissioned by the Chamber of Industry and Commerce (IHK) for Munich and Upper Bavaria.  "An EU without the British is a great loss for the internal market and a serious setback to the idea of European integration," notes IHK President Eberhard Sasse.   "Due to the high share of manufacturing in value creation and the close international interdependence of trade, Bavaria’s economy is particularly heavily affected by the Brexit crisis,” he adds. In 2017, 7.3 percent of Bavarian goods exports worth 13.8 billion euros went to Britain, which ranks fourth among Bavaria’s most important export destinations. During the same period, 3.4 percent of all goods imports into Bavaria worth a total of 6 billion euros came from Britain.

“Our figures do not take into account the fact that Brexit diminishes the EU's international negotiating power.  This weakens the EU’s position vis-à-vis China and the USA.  Moreover, Brexit is shifting the balance of power within the EU from North to South, which may weaken support for free trade in Europe.  All of this does not bode well for Bavaria’s export economy," explains the study’s author Gabriel Felbermayr, Director of the Ifo Center for International Economics.

The negative impact of Brexit on the Bavarian economy would be considerably diminished if Britain’s withdrawal were to be linked to a far-reaching free trade agreement with the EU. According to Ifo’s study, the loss of value added in this case would amount to 535 million euros per year. 

IHK President Sasse stresses the far-reaching implications of Brexit for the production processes of companies. "Value chains have long been international. Bavaria’s strong automotive industry, in which many goods and products cross borders several times, is a classic example. Britain’s departure from the EU will seriously shake up production processes that have evolved over time and will leave automotive companies facing major challenges. They expect a binding set of rules and planning security even after Brexit,” warns Sasse.

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