These are the main findings of a WIFO study by Harald Oberhofer, Michael Pfaffermayr and Yvonne Wolfmayr commissioned by the Austrian Federal Ministry for Digitalization and Economic Affairs (BMDW). However, the British economy will be more affected by the exit than the Austrian economy.
"According to our estimates, the trade effects will be lowest in manufacturing and highest for agricultural products," says WIFO study coordinator Harald Oberhofer. Austrian agricultural exports to the UK are expected to decline by up to 23 percent. At the same time, Austrian agricultural imports from the UK are expected to slump by up to –46 percent. Austria's motor vehicle exports and motor vehicle subcontractor exports to the UK as a result of the trade agreement are expected to fall by around 5.7 percent, while the British automotive industry can expect exports to Austria to decline by around 13 percent.
In bilateral trade in services, two Austrian sectors – "financial services" and "other business-related services" – will be hit harder than the British economy by the UK's leaving from the European common market. For example, according to model estimates, Austrian exports of financial services to the UK will fall by around 13.9 percent, while Austrian imports of financial services from the UK are expected to decline by around 8.9 percent.
As a result of the new free trade agreement, Austrian production of food products for the domestic market will also decline by around 0.15 percent. With Brexit in place, the EU will lose a significant net importer of agricultural products. UK imports of food products will decline from all EU countries, leaving more products within the single market. This will increase competition, which may slightly benefit Austrian consumers. For the Austrian manufacturing sector, the domestic trade and real income effects of the new trade agreement are hardly significant and, in line with previous studies, indicate a relatively low impact of Brexit on the Austrian economy. Finally, Austria will suffer welfare losses in the financial services sector of around 0.7 percent as a result of the Brexit. The departure of the British financial marketplace will weaken competition in this sector in the EU and make the purchase of financial services more expensive.
In the study published on 14 January 2021 by the Research Centre International Economics (FIW), WIFO calculated the consequences of the British withdrawal from the European common market for the Austrian economy. For the first time, the study takes into account the new trade agreement between the UK and the EU, which was agreed upon by the negotiating partners on 24 December 2020, and provides initial estimates of the potential economic trade and welfare effects of the new trade agreement.
According to WIFO economist and WU professor Harald Oberhofer, new trade agreements are important for the UK in order to reduce the economic costs of leaving the single market: "The negotiations of such agreements by the EU are often very lengthy and the ratification process is complex and time-consuming. The UK could take a more agile approach here and possibly become a serious competitor to the EU. However, the market size and the experience in negotiating free trade agreements with new potential partner countries speak in favour of the EU."
