Economist Intelligence Unit predicts impact of Brexit on six key UK economic sectors

There is less than a year left until the UK officially leaves the European Union. However, for 21 months after that or possibly even longer, there will be a transition period during which the UK will still have access to the single market and be bound by the obligation of membership. The Economist Intelligence Unit (EIU) has compiled a report on how six sectors of the UK economy will be impacted by Brexit.

The EIU report predicts that in three sectors the impact will be direct and difficult to manage – financial services, health care and life sciences, and automotive. In consumer goods and retail, telecoms and energy, the impact is “likely to be more diffuse, but still disruptive”.

The report puts forward two scenarios for the trade relationship between the UK and the EU and the impact on the six specific sectors, which has not been yet discussed thoroughly in negotiations: the first scenario is a “Canada-style free trade agreement” that includes some special terms that are important to the UK economy (the core scenario in the report). The second is a “hard Brexit” or “no-deal Brexit” – where_­ talks fail and the UK leaves the Union with no trade agreement.

The EIU’s long-term outlook for the UK economy remains positive, regardless of the terms of the departure from the EU, but the hard Brexit scenario does involve a slowdown in growth.

Financial services: the EIU expects that London will retain its status as one of the world’s leading financial centers and Europe’s leading financial hub even after Brexit. Also, due to the significant inter-dependence between the EU and UK financial services sectors, it is expected that there will be a mutual interest in achieving a deal that works for both sides. However, the deal will be partial and some institutions will relocate some part of their businesses.

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Healthcare and life sciences: in the core scenario, this sector is expected to have lower exports, but a shortage of medicines will be avoided through regulatory agreements. Under a hard Brexit scenario, lower tax revenue and consumer spending would significantly lower health spending per capita – but the UK government could direct some of the money saved from no longer contributing to the EU budget to mitigate the impact.

Automotive: expected to face a huge challenge if there is no trade agreement, as large-scale production in the UK would become difficult. Under a hard Brexit, the report expects vehicle sales to be 13.1 percent lower by 2022 than under a core scenario.

Consumer goods: this sector and the food sector will be affected by the loss of EU workers and disputes over regulation, and if no agreements are reached, the effect is “likely to push down exports and push up the prices of imports even further”. A no-deal Brexit will impact retail spending the most, which could be 13.4 percent lower in 2022 in a hard Brexit scenario than in a core scenario.

Energy: the UK is expected to continue emissions reductions and decarbonisation, but this will become more difficult and energy costs may rise if the UK leaves Europe’s internal energy market.

Telecoms: exit from the “digital single market” will primarily affect operators with large business on the continent. But there may also be an effect on investment in innovation and on the prices UK consumers pay for mobile roaming. Under a no-deal Brexit scenario, investment in mobile technology may be 3.5 percent lower by 2022.