These Are the Numbers Behind the Brexit Negotiations

By Simon Kennedy
June 19, 2017

Tough choices await negotiators in the Brexit talks which begin on June 19. These charts illustrate some of the key data the negotiators will have in mind over the next two years.

Immigration

U.K. Prime Minister Theresa May initially interpreted last year’s vote for Brexit as a call to clamp down on immigration, which is currently unfettered from the EU. Britain is the second-most-popular destination in the region after Germany, and May is signaling she will impose new curbs.

Non-British population, by EU nationality

Top 5

Poland

916K

India

362K

Ireland

332K

Romania

233K

Portugal

219K

Ireland

U.K.

Poland

France

Romania

Italy

Portugal

Source: ONS Population of the U.K. by Country of Birth and Nationality, 2015

With 2.3 million Europeans working in the U.K., however, bankers, telecommunications companies and farmers are warning the government not to squeeze too hard on a source of much-needed skills.

Top U.K. industries for European workers

Manufacturing

Wholesale and retail

Health and social work

Accommodation and food services

Construction

Education

Professional, scientific and technical

Transport and storage

Admin and support services

Information and communication

 

0

175

350K

307K

Manufacturing

Wholesale and retail

Health and social work

Accommodation and food services

Construction

Education

Professional, scientific and technical

Transport and storage

Admin and support services

Information and communication

 

261K

225K

222K

194K

159K

147K

141K

135K

97K

Source: ONS Labour Force Survey, 2016

Trade

In choosing to leave the EU, Britain is jeopardizing access to its largest market, which buys about 45 percent of its exports. Following the June election, May is under pressure to do more to safeguard commerce. The EU knows it has leverage, although cutting off access to the U.K. could end up hurting its own companies, which rely on British consumers to buy their goods.

Balance of trade as a share of GDP

EU

Non–EU

2%

0

-2

-4

1999

2007

2015

EU

Non–EU

2%

0

-2

-4

1999

2003

2007

2011

2015

Source: House of Commons Library

If Britain does leave the EU without a trade deal or a transition to one, its exporters are likely to be exposed to World Trade Organization tariffs after years of duty free trade.

WTO tariffs for Britain’s top exports

Machinery

2%

Vehicles

8%

Aircraft

3%

Beverages

4%

Iron and steel products

2%

Cereals

41%

Tanning and dyeing extracts

8%

Exports 2016

Average tariff

2%

£50.7B

Machinery

8%

£30.4B

Vehicles

3%

£15.5B

Aircraft

4%

£6.9B

Beverages

2%

£3.7B

Iron and steel

41%

£2.3B

Cereals

8%

£2.1B

Tanning, dyeing extracts

Sources: Economic and Social Research Institute and ONS U.K. Trade, 2017

Supporting the European Union

The departure of the U.K. will leave a hole in the EU budget unless Britain agrees to pay something in return for some benefits. Britain is the bloc’s second-biggest contributor, and the gap it leaves behind will need to be filled by spending cuts or by others chipping in more.

These 12 countries paid into the EU budget more than they got back in 2015

-€14.3B

Germany

-11.5

U.K.

-5.5

France

-3.7

Netherlands

-2.6

Italy

-2.2

Sweden

-1.4

Belgium

-0.9

Austria

-0.8

Denmark

-0.5

Finland

Luxembourg

-0.09

-0.02

Cyprus

-€14.3B

Germany

-11.5

U.K.

-5.5

France

-3.7

Netherlands

-2.6

Italy

-2.2

Sweden

-1.4

Belgium

-0.9

Austria

-0.8

Denmark

-0.5

Finland

-0.09

Luxembourg

-0.02

Cyprus

Net receipts to EU budget
Source: European Commission

EU budgets are stretched over long time frames, meaning members don’t immediately have to cover what they commit to. That leaves the U.K. facing the likelihood of being asked to pay for past commitments.

EU spending commitments vs payments

€180 billion

Commitments

160

Payments

140

120

2014

2017

2020

Commitments

Payments

€180 billion

160

140

120

2014

2016

2018

2020

Source: Centre for European Reform, 2017

Looking Ahead

An early flashpoint will be whether the U.K. is willing to pay a divorce bill reputed to be around £50 billion. EU officials say the British need to settle their dues before talk can turn to a trade deal, but May’s government questions both the sums floated and their legality.

What Britain's bill to exit the EU might be

€24.5B

to

€72.8B

€72.8B

€24.5B

to

Figures represent the best- and worst-case scenarios depending on: a) whether the EU negotiates maximum or minimum liabilities and receipts for the U.K., and b) the precise share of EU liabilities the U.K. would be responsible for (12-15%).
Source: Centre for European Reform, 2017

A problem for May is that British voters appear to have conflicting goals from the talks. They want less immigration while retaining the advantages of EU membership, such as free trade.

What the British are hoping will emerge from Brexit negotiations

In favor

Against

Free trade

88%

3%

Favorable mobile roaming rates

71%

9%

Financial passporting

65%

7%

Treat EU migrants like non-EU migrants

68%

15%

Customs checks

69%

16%

In favor

Against

88%

Free trade

3%

71%

Favorable mobile

roaming rates

9%

65%

Financial

passporting

7%

68%

Treat EU migrants like

non-EU migrants

15%

69%

Customs checks

16%

Source: NatCen Social Research British Social Attitudes survey, 2016

Now it’s time for the EU and U.K. to crunch the numbers in attempt to gain leverage over the other or secure the best possible deal for both. Much will depend on May’s negotiating skills and how strongly the EU wants to avoid others eyeing the exit.