A German think-tank has urged ministers to come to an agreement over Brexit, warning that a no-deal situation could cost billions of euros in lost exports.
The German Economic Institute (IW) published a report stating that British exports to Europe could decrease by as much as 50 per cent if the UK leaves the European Union without striking a deal, while German exports could decline by 43 per cent.
If a no-deal situation does transpire, trade between the UK and the bloc would default to terms decreed by the World Trade Organisation and potentially force countries to impose tariff and non-tariffs barriers on goods.
"A 'hard Brexit' could cause considerably high costs on both sides of the channel," said IW report author Michael Huether.
The report estimates that new tariffs may cost the UK €5.1 billion in the short term, but this would have the potential to rise to €186 billion in trade in total.
On the opposite side, the EU could be subject to levies of €10.5 billion, assuming that current trade volumes remained unchanged, the analysis stated.
EU exports could face non-tariff barrier costs of €25.8 billion, while the expense to British exporters might be up to €14.6 billion if they continue to send goods to Europe.
Companies in the automotive industry are likely to face especially high penalties in the event of a no-deal, with tariffs and duties likely to increase considerably.
A two-day Brexit summit is to start today (October 17th 2018) at which lawmakers hope they will be able to thrash out terms of the UK's departure from the EU on March 29th 2019.
President of the European Council Donald Tusk has said Britain must bring "concrete proposals" to the table if it wants to see a breakthrough in Brexit negotiations.
However, the Bank of England (BoE) released a report this week in which it criticised the EU for its lack of movement in stating how financial services will operate should a hard Brexit occur.
It said "considerable progress" has been made in Britain to work out how transferring data, insurance and derivatives will continue post-Brexit, but accused the EU of only making "limited progress".
A statement from the BoE said: "It is not possible for companies on their own to mitigate fully the risks of disruption to cross-border financial services. The need for authorities to complete mitigating actions is now pressing."
