MNI POLICY: Brexit Hit To Euro Consumption, DBB study claims

By Luke Heighton

     FRANKFURT (MNI) - Brexit will likely lead to a de-liberalization of trade

in services and a drop in real consumption for both the UK and Europe --

regardless of any bilateral agreements reached, a study published by Germany's

Bundesbank claimed Friday.

     Here are the key points from the paper (which do not necessarily reflect

the opinion of the Deutsche Bundesbank or the Eurosystem).

     -- In the event of a hard Brexit with no preferential market access for

services between Britain and the EU, the UK would experience a 0.33% drop in

real consumption, simulations based on 2014 data showed.

     -- Real wages and real dividends in service sectors would see falls of a

similar order, averaging 0.38% and 0.32% respectively. In the manufacturing

sector, real wages and real dividends would fall by just under 0.1% on account

of input-output relationships and adjustments in input markets alone.

     -- Germany and France would see modest declines in real consumption, at

0.03% and 0.06% respectively, while Italy and Portugal would experience falls of

between 0.045-0.033%. Belgium and the Netherlands would dip by 0.177-0.091%.

     -- Real consumption in the Republic of Ireland would decline by

0.451-0.330% - in line with Great Britain and Northern Ireland. Greece is

expected to shed 0.026-0.004%, while in Luxembourg the drop in real consumption

would be more pronounced, at 2.4%.

     -- Overall, "increased barriers for trade in services alone would suffice

to drive real consumption down significantly in some countries," the study's

authors concluded, leaving the UK and the EU to pay a "hefty price tag" for

Brexit.

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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