What will a complete UK Brexit mean to Belgium? | KPMG | BE

What will a complete UK Brexit mean to Belgium?

What will a complete UK Brexit mean to Belgium?

Use the following chart to determine if your company is prepare to face Brexit.

1000

Related content

Brexit tax implications

Research has shown that that the UK has a special position for Belgium. As a member of the EU, Belgium will face the harsh reality of the UK’s exit. It is our fourth largest export country; 8.8% of our goods exports go to the UK, amounting to € 31.9 billion. And our services sector has also benefitted from exports to the UK. In terms of imports, the UK plays a slightly less important role for Belgium. Imports of goods (€ 17.4 bn) are just over half the value of exports (€ 31.9 bn). Our main imports are mineral products (21.3%), road vehicles (20.5%), chemical products (17.0%) and machinery (13.2%) from the UK. The Belgian economy has recovered from the crisis in recent years, but the uncertainties surrounding Brexit may have a temporary and negative impact on consumer spending and investments.

If the UK leaves the EU in two years’ time without a new cooperation agreement, it will fall back on the agreements of the WTO treaty. The WTO treaty is aimed at encouraging trade between countries across the globe, but even if only WTO regulations apply, Belgium will be affected more severely than other European countries. Belgian exports could be subjected to an average levy of 5.5%, while the EU average is 4.9%.

Economic consequences for Belgium

Brexit will have an impact on the Belgian economy. Belgium is particularly vulnerable because of its close trade links with the UK. On the ranking of European countries’ exposure to Brexit Belgium ranks 10th2.

Import and export

We have established that Belgium has relatively high trade levels with the UK, when compared with the EU as a whole. The short-term weakness of the British pound will have a negative impact on Belgium’s competitive position.

Imports from the UK will become cheaper for all countries and these imports will continue to access the European market without any obstacles in the next two years. In terms of Belgian exports, companies will face new obstacles. If the UK is no longer part of the EU Customs Union (depending on the exit scenario), there may be import duties in the future, with extra administrative costs as a result, and VAT payments when goods are crossing the borders between the UK and the EU. The impact of Brexit will be felt most in the industry of motorized vehicles and pharmaceutical sector. They depend on relatively large amounts of exports to the UK.

  • For instance, the industry of motorized vehicles constitutes 26.1% of the total Belgian export to the
    UK, amounting to € 8.3 billion.
  • Pharmaceutical products constitute 20.5% of the Belgian export to the UK, amounting to € 6.5 billion. It is expected that the impact on the pharmaceutical sector is less significant, since this area is less pricesensitive3.

 

Investments

Brexit will not only have an impact on trading goods and services, but also on the foreign direct investments (FDI). Investments totaling around € 19.4 billion in 2013, which yielded a profit of over € 1 billion in 2013, which is the equivalent of nearly 5% of Belgian GDP4.

Belgian financial links with the UK are substantial, with Belgian entities owing € 31 billion to UK banks in 2014. It should be noted that this is only one third of the level in 2007, before the financial crisis5.

International companies operating in Belgium and additional obstacles

Of course numerous international companies will also feel the impact of Brexit. What those consequences will be obviously depends on the exit scenario chosen, but it is already clear that international companies in particular will have to prepare for major changes. And we are referring in particular to companies with subsidiaries in the UK and a parent company in Belgium or vice versa.

Connect with us

 

Request for proposal

 

Submit