Brexit and central Europe: Who and what is at risk?

Brexit will be will be disruptive and divisive for the whole of the European Union. In this report, we focus on its impact on Central and Eastern Europe (CEE) through three key channels: trade, free movement and money.

In terms of trade, we look at value-added exports to the UK as these better reflect what the CEE actually contributes to European supply chains. While these exports are low in terms of GDP, the Czech Republic, Poland and Hungary look the most exposed in the region. 

Agriculture, autos, textiles and retail trade are the sectors dominant in CEE trade with the UK. Regulatory and logistical barriers pose challenges here.

Free movement has seen Czech, Hungarian and Polish workers gain a ten-year headstart on the Romanians in entering the UK. Around a quarter of Poles working abroad live in the UK. Having a more mature presence in the UK should mean the early movers are more likely to receive ‘settled status’.

On the money side, the UK had been funding around 6% of the EU’s budget. This contribution will disappear for the 2021-27 round. However, the indirect impact of the UK’s departure may be larger. The EU average GDP per capita level will drop after Brexit, propelling the likes of the Czech Republic and Poland above key financial thresholds. EU funding for CE4 economies could drop by anywhere between 12% and 24% in real terms.