If no bespoke trade agreement is reached between Britain and the European Union (EU), then EU27 exporters will collectively face £31 billion of additional costs after Britain leaves the EU, while UK exporters will be paying an extra £27 billion. The costs in this analysis refer to tariff and non-tariff barriers incurred by businesses if the UK and EU have to trade on WTO terms after March 2019, but doesn't take into account other factors such as the impact of Brexit on migration, pricing changes or third country free trade agreements (FTAs), which are likely to increase the overall impact. The analysis, by Oliver Wyman and Clifford Chance, also estimates that a future customs arrangement equivalent to The Customs Union would reduce the EU27 impact to around £14 billon and the UK impact to around £17 billon.

Bavaria, London, Ireland hit hardest

Some of the key 'pinch points' identified in the report include:

• Ireland’s agricultural sector due to its exposure to UK consumers;
• the German states of Bavaria, North Rhine-Westphalia, Baden–Wuerttemberg, and Lower Saxony, which will shoulder around 70 per cent of the country’s direct impacts as a result of exports to the UK that arise from their leading global positions in automotive and manufacturing;
• the UK's financial services sector will incur around a third of the extra costs;
• UK sectors such as automotive, aerospace, chemicals and metals and mining sectors, will also be impacted due to companies being highly integrated into European supply chains.

Oliver Wyman's Kumar Iyer commented: “There will be both winners and losers from Brexit. In order to navigate the uncertainty companies should be thinking about impacts under different scenarios both operationally and strategically. We see the best prepared firms taking hedges now based on the direct impacts on themselves, their supply chains, customers and competitors. Unfortunately we see that small firms are least able to take these steps at present.”

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CTMfile take: The report urges companies to take action now to mitigate the impacts of Brexit but notes that smaller firms will be least able to mitigate these costs and in turn pose risks to their supply chain.