What will Brexit mean to the rest of Europe?

As we come to the end of another week of no clear progress on Brexit, it might be time to look at what the UK leaving means to the rest of the EU.

Those who support a hard Brexit – no deal with Europe – point out that losing its second largest economy will be a serious blow for the EU. Despite the rift, Britain has made a considerable contribution to the EU over the last 40 or so years.

The UK has provided the Union with its own global financial services hub and provided global trade connections that the rest of the EU has benefitted from.

Britain is the second biggest economy in the EU and has military capability and diplomatic soft power and all-round influence.

Losing Britain will dent the EU’s ambitions and commitment to an ever closer union. It could encourage exit ambitions from other wavering members. It will reduce the size and importance of the bloc, and conceivably cost every member trade opportunities.

But do the countries of Europe really worry about Brexit?

Germany – fears of recession

Clemens Fuest, head of the Munich-based Institute for Economic Research (Information and Forschung, IFO), has warned that a hard Brexit could push Germany into a recession. In an interview with public broadcaster Deutschlandfunk, Fuest said that if the UK leaves the European Union with no deal, it could be a setback for the German economy.

Germany’s Council of Economic Experts recently slashed its 2019 GDP growth forecast to 0.8%, from 1.5% in November. They warned that the country’s economic boom was over for the time being, but said they did not expect a recession, thanks to a healthy domestic economy. Fuerst suggested that a hard Brexit – with tariffs for German exports or cars to Britain, amongst other consequences would lead to a light contraction in the economy which could be classed as a recession.

Ireland – worries about peace

The Irish view of Brexit is inevitably negative – and the issues are not purely economic.

The UK is the second biggest customer for Irish goods. Joint EU membership means goods and people can cross the border freely, but there are fears Britain’s withdrawal will mean customs checkpoints – provoking Irish nationalists and raising fears of a violent backlash.

The Netherlands – looking for a boost

The ports of Britain are the gateway to Europe for much of the world – a role which Rotterdam is keen to take over.

It is not just the transport sector. Big-name multinationals such as Sony and Panasonic are shifting their European HQs to Amsterdam. Michiel Bakhuizen, spokesman for the Netherlands Foreign Investment Agency claims that the Dutch government is “in contact with more than 250  corporations interested in an eventual move to the Netherlands because of Brexit”.

The consensus is that in the short term, there will be losses from Brexit – as much as 3% of GDP – but these will be more than outweighed by the longer-term gains.

Spain – sorry to see us go

Spain is devoutly pro-EU, and very anti-Brexit. The ongoing economic problems faced by Spain have meant record numbers of Spanish Nationals have moved to Britain for work.

Despite the falling value of the Pound, the British fondness for holidays in Spain means considerable income for the Spanish tourist market.

The result is that the majority of Spain don’t want Britain to leave the EU. Even the thorny problem of Gibraltar seems to have been solved, such is the positive view of the UK by our Spanish friends.

France – Au Revoir…

The Channel tunnel may have been key to softening the historically fraught Anglo-French relations. Personal and cultural links have grown stronger now that travelling between Paris and London is easier and faster than some daily commutes.

But despite any rapprochement, the general attitude is that France may be better off without the UK in Europe.  In a YouGov poll back in 2017, a slight majority of French respondents made it clear they wanted the UK to leave, and since then, France has been busy preparing for our departure by expanding the customs force and investing in port infrastructure. France remains committed to the EU, and with the UK gone, France could shape the EU more to its own liking. Brexit is seen as not a loss but a potential gain.

The views on Brexit from our soon to be erstwhile partners are mixed. Views on what it will mean for the UK economy – and your own cash – are equally varied.

Of course, when it comes to your own financial future, you need a clearer view. It might be time to look at your plans with an expert.

Naturally, at Continuum, we would be very happy to help.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

Sources:

finance.yahoo.com – Dutch say 250 firms interested in Brexit move – 23rd January 2019

msn.com – Hard Brexit could tip Germany into recession, says IFO chief – 1st April 2019

ft.com – France’s hardening views on Brexit – 20th February 2018