This policy contribution, based on a note written for the Bundestag EU Committee and written by Guntram B Wolff (Bruegel), explores the possible consequences of a no-deal Brexit for the European Union and assesses preparations on the EU side. It also provides guidance on the optimal strategy for the EU, depending on the choices made by the United Kingdom.
Overall, a no-deal Brexit would be disruptive in the short-term:
- There would be immediate very significant administrative and logistical challenges in trade. Preparations to reduce those disruptions are underway but are unlikely to be sufficient. But while Most-Favoured Nation tariffs will affect some sectors significantly, the macroeconomic effect on the German economy might not be huge.
- If the UK fails to honour its financial commitments to the EU, about €16.5 billion would be missing for the remainder of the current EU budgetary period. The gap could be filled thanks to the existing ‘own resources’ ceiling. The overall missing ‘Brexit bill’ would amount to about €45-50 billion.
- Not honouring financial commitments would be considered by the EU as akin to default and would likely lead to an uncooperative no-deal Brexit. It would be more disruptive than a cooperative no-deal Brexit, in which the EU and the UK cooperate on a number of pressing emergency files.
- The European Commission has issued a number of draft regulations to mitigate the effects of a no-deal Brexit, including on issues such as aviation and visas. These are comprehensive but would not offset the effects of a no-deal Brexit, which would be highly disruptive in some sectors.
The effects of a no-deal Brexit in the medium to long term are difficult to assess. A no-deal Brexit would lead to deterioration in long-term political relationships, which would make a new trade arrangement and other cooperation in the future less likely.

A specific concern is the situation in Ireland, which is also the most contentious part of the Brexit negotiation. If the EU wants to protect the integrity of its single market, a no-deal Brexit will mean the imposition of customs controls on the Irish border. The European Commission’s draft legislation aims to preserve the peace process, but a hard border could provoke renewed violence.
The overall strategic direction the EU should take would be to increase the cost to the UK of a no-deal Brexit as much as possible (respecting ethical limits), while showing more flexibility over the political declaration and possibly the withdrawal deal itself.
This post represents the views of the author and not those of the Brexit blog, nor the LSE. It was first published at Bruegel.
Guntram B Wolff is the Director of Bruegel. His research focuses on the European economy and governance, on fiscal and monetary policy and global finance.
Is it me or is all this just guesswork?
Surely the German economy will suffer more than any on a no deal?
18% of German cars are brought into the U.K.
We make and sell all the eurobus wings, authority says it will be 10 years to take it all back after training and gearing up.
This article carries not one piece of evidence that the impact on Europe will be minimal.
We import from Europe 302billion pounds of trade and service, if the EU apply tarrifs then of coarse we will, creating £7b windfall.
Obviously Eu goods will be more expensive, meaning that the rest of the world under wto can compete for our money.
Irish border.
Why are we fretting and giving guarantees to the EU when ( in the event ) it is the EU who will create a hard border?
Jus walk away from these protectionist, undemocratic, unelected dictators and they will crumble before us.
crumble insofar as they will sign a deal and agree the border
Our MPs are just as bad.
Hear is a fact that few have seen.
U.K. law says that there is no legal obligation to act in good faith.
However EU law ( ECJ) there is in law a duty to act in good faith.
That gives Mays border deal legal weight.
What is the problem?
It’s MP’s pursuing their own agenda that is the problem.
Their day of reconnibg will arrive, when they come around canvassing to keep their gravy boat jobs
Remember!!!!!!
Yep quite agree with yourself. The other problem of course is that what the people voted for and what the MP’s want is totally opposite to each other. Would it be so great if we all decided not to vote at the next elections to show our contempt for MP’s who follow their own agenda and not the will of the people!
The following info may be of use to those who say leaving the EU without a deal would be a “piece of cake”.
This is the UK government’s official advice about what will happen if there is “no deal” between the UK and EU27 by the end of March.
The link is as follows:
http://www.gov.uk/government/collections/how-to-prepare-if-the-uk-leaves-the-eu-with-no-deal .
No one has ever said that it would be a piece of cake.
What the link shows is the integration with the protectionist EU was deap.
But there was integration before we were dragged into a political union that was perfectly workable.
Short term pain and disruption in my view is worth the divorce.
We can live with it.
We can prosper with independence.
In any case I feel confident that there will be a final deal, all be it will be down to the wire.
If there is not a deal the blame will be well and truly at the feet of the protectionist EU.
And they will hurt more. Much more.
On that point.
Why is it ok for the almighty EU to apply tarrifs to those countries who are not prepared to give bribe money, but it’s not ok for USA to apply tarrifs in return? ( German cars)
Why is it ok for EU. To block trade from third world countries who desperately need economical boost because they cannot afford the bribes?
The repercussions of their trade block see millions suffer because their nearest trading potential is a closed shop.
Why?
Money, that’s all. Just money!