Nusseibeh said the position of the European Union and the UK is asymmetrical and even a hard Brexit would have little impact on the EU, while seriously harming the UK.
While 16% of EU exports went to the UK in 2016, 43% of UK exports went the other way, Nusseibeh said.
“If we assume that as a result of negotiations friction is minimal, we can guess a drag of 10% year one declining to 5% thereafter. If we further assume that the 12% with third party countries suffers minimally at a 10% drag as we renegotiate with them, then our exports will suffer a 4.3% hit immediately from the friction of exports to the EU (then settling down to 2.1%) and 1.2% from the friction of negotiating a new deal with others (then settling down to 0.6%).
“To make up for that we would therefore need to grow non EU exports by 12% in the first year and 6% thereafter to get the economy back to an even keel of the position before Brexit.”
In contrast, for the EU a 10% friction equates to a loss of merely 1.6% of exports and it would only have to increase its exports to other countries by 2% in year one and 1% thereafter to get back to the level playing field position before Brexit.
“[Accordingly], the EU would be far less concerned about the economic effects of the UK leaving and might therefore see no downside in adopting a hard stance in negotiations,” he said.
Nusseibeh’s position is at odds with Brexit campaigners that argued the EU needs the UK more than the EU, but he said he wanted to reintroduce facts to the debate.
“There has been a lot of emotive discussion around Brexit, from both sides, but little regard for facts or logic. As a result, the discussion has now degenerated into a childish exchange of slogans with no real thought apparently given on the effects of Brexit on the real economy and the country.”
Brexit means Brexit
Despite his damning verdict, Nusseibeh said Brexit is inevitable and a soft Brexit is the most likely outcome.
He attributed Brexit’s inevitability to the “reasonably high turnout” and the “ideological commitment” of the Conservative party to leaving the EU.
Of the 72.2% of voters that participated in the referendum, 51.9% voted in favour of leaving the EU.
He said the ball is in the UK’s court, but a soft Brexit would result in a hit to GDP growth that “might be manageable” compared to a “much harder economic hit” under a hard Brexit that introduces a higher degree of friction to trading.
Next week represents one year since Prime Minister Theresa May triggered Article 50, theoretically giving the UK two years to prepare its exit from the EU. However, the government recently reached a transition agreement to delay its official departure until 31 December 2020.
