It isn’t just the United Kingdom that is likely to see a falling economy after the Brexit transition period finally ends on December 31st, 2020.
According to the Bank of Spain, Spain’s economy will be negatively impacted by Brexit to a larger degree than most other EU countries.
This is predominantly due to a projected lower number of British tourists to Spain due to border restrictions, as well as falling Spanish exports to the UK as a result of trade tariffs if a no-deal Brexit occurs.
In the central bank report, it was noted that 9.6% of total Spanish exports in 2019 were to the UK.
This amount represents 3.4% of Spain’s GDP.
In addition, 21% of all tourists to Spain come from the United Kingdom, and almost 20% of all of Spain’s tourist income is derived from arrivals from the UK.
More than 18 million visitors from the UK arrived in Spain in 2019.
This means, if the British pound plummets against the euro after Brexit, this will impact the spending ability of British tourists when it comes to exchanging pounds for euros. It may even prevent a substantial number of British tourists from visiting Spain at all.
The central bank believes both tourist arrivals to Spain and exports from Spain to the UK will be negatively affected from 2021 going forward, regardless of a Brexit deal or not.
In a no-deal Brexit scenario, things worsen even more for Spain as World Trade Organization (WTO) tariffs of at least 7% would be added to all Spanish exports to the UK.
When it comes to the automobile industry, those tariffs would be 10%, thus making cars manufactured in Spain 10% more expensive in the UK than they have been in the past.
With Spanish cars accounting for 14.2% of automobile imports to the UK, and Spain the second largest car manufacturer in Europe after Germany, that could be a serious blow to the Spanish car industry.
An industry already reeling from the Spanish government’s excessively strict restrictions due to Covid-19.
Other exports from Spain to the UK include wine, fruit and vegetables, nuts, olives and olive oil, meat, machinery, computers, pharmaceuticals, clothing and accessories — all significant industries, along with thousands of other Spanish businesses, that are likely to be negatively affected due to Brexit.
In other words, once December 31st, 2020 passes and the UK’s connection to the EU has completely disappeared, Brexit could hit Spain harder than any other country in the EU.
With an economy already severely hammered due to government restrictions over Covid-19, 2021 is likely to be another devastating year for the Spanish economy.