Importance of Services Trade for the EU Economy and the Impact of Brexit

Client/Funding Institution

Anniversary Fund of the Oesterreichische Nationalbank

Abstract

Services are a key sector of the global economy, accounting for the bulk of GDP in most countries and for a significant share of global trade. The long history of economic integration created close ties between the UK and rest of the EU that are not so easy to disentangle. In order to estimate the potential costs of Brexit it is important to better understand the interdependency of the EU members’ economies with respect to services trade as a rise in services trade cost post-Brexit would impact not only the UK services firms, but also services suppliers and manufacturing producers in the EU. It is likely that some trade diversion will take place both in the UK and the EU, resulting in reallocation of resources to less efficient firms and negative welfare effects. In our study we explored in detail the linkages between the UK and EU-27 economies with respect to services sectors and estimate possible effects of Brexit for both the UK and the remaining EU members.

Duration

January 2019 - September 2020

wiiw team Leader

Olga Pindyuk

wiiw Staff

Birgit Buschbom, Alexandra Bykova, Neil Foster-McGregor, Sandra M. Leitner, Robert Stehrer

Publications

Countries covered: EU27, United Kindom

Research Areas: International Trade, Competitiveness and FDI

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