A hard Brexit could cost the UK's car, technology, healthcare and consumer goods sectors almost £17bn a year, a new report claims.
Published just a day after Theresa May set out the details of what a "no deal" scenario would look like for trade, the Baker McKenzie report argues this option would be hugely damaging for the four sectors, which make up 42 per cent of the UK's manufacturing GDP and 45 per cent of manufactured exports to the EU.
Produced in conjunction with consultants Oxford Economics, the report claims increased costs brought about by the introduction of tariffs could result in EU consumers switching to domestically produced alternatives or to a different exporting country.
The impact would be most pronounced in the consumer goods and car sectors, which stand to lose out on £5.2bn and £7.9bn in export revenues respectively every year.
New tariff and non-tariff barrier rates, imposed as a result of the imposition of a hard border between the UK and the EU, are estimated to cost £3.8bn annually, with the car sector alone faced with £2.1bn additional costs. The report claims the cost of non-tariff barriers, which include new compliance paperwork and other administrative requirements, can match or even outstrip the tariffs themselves in some sectors, such as healthcare.
Baker McKenzie Trade partner Jenny Revis said: "These figures indicate the extent to which the UK's key manufacturing sectors are likely to be hit by the impact of a hard Brexit. You can understand why there is now mounting pressure for the UK to negotiate new customs arrangements for post Brexit trade with the EU and for companies to work with their industry groups to help shape future trading relations with the EU."
To offset the losses, exports to the UK's remaining five key markets - including the US, Japan and China - would need to increase by 60 per cent, the law firm estimates.
And while the impact will be felt in both the UK and EU, Baker McKenzie warned it would be "significantly greater" in the UK. The EU accounts for 49 per cent of UK exports, but just nine per cent in reverse.
"This demonstrates that the UK is highly dependant on the EU and, as a result, the proportionate decline in UK exports will be four times the decline in EU exports in these sectors – even before taking into account increased trade within the EU-27," the report claims.