impact of brexit: iberia deep dive€¦ · confidentiality our clients’ industries are extremely...

© Oliver Wyman

IMPACT OF BREXIT:IBERIA DEEP DIVE

CONFIDENTIALITY Our clients’ industries are extremely competitive, and the maintenance of confidentiality with respect to our clients’ plans and

data is critical. Oliver Wyman rigorously applies internal confidentiality practices to protect the confidentiality of all client

information.

Similarly, our industry is very competitive. We view our approaches and insights as proprietary and therefore look to our clients to

protect our interests in our proposals, presentations, methodologies and analytical techniques. Under no circumstances should

this material be shared with any third party without the prior written consent of Oliver Wyman.

© Oliver Wyman

2© Oliver Wyman

• Oliver Wyman have recently conducted a cross-sector, pan-European analysis of the impact of Brexit, with a deep-dive into

the impact on Spanish industry. Our analysis quantifies the impact of tariff and non-tariff barriers on direct UK-Spain and

UK-Portugal trade – direct cost of Brexit; the impact is concentrated in specific industries, but smaller in aggregate impact

than other studies

The Spanish and Portuguese deep dive revealed several key findings that are country-specific for them:

– The UK is an important destination of both Spanish and Portuguese exports: the UK is the fourth exports destination

for both Spain and Portugal

– The impact of Brexit is concentrated on three industries in both Spain and Portugal, accounting for 70% and 60%

of the total impact respectively: Automotive, Agriculture, food and drink; and Consumer goods

- In Spain, the sectors cost breakdown is as follows: Automotive €886 MM (4% of GVA), Agriculture, food and drink €584

MM (0.8%), Consumer goods €242 MM (0.5%)

- In Portugal, the sectors cost breakdown is as follows: , Consumer goods €92 MM (1.0%), Automotive €90 MM (2.7%),

Agriculture, food and drink €57 MM (0.5%)

– For both economies, the overall impact is ~0.3% of country GVA, which is similar to the average for the EU as a

whole.

- In absolute terms, Spain faces the 6th largest impact in the EU

– Under the baseline WTO scenario, at an aggregate level the trading cost of Brexit is material:

- Spain: Post-mitigation impact of ~0.3% of GVA; ~€2.5BN

- Portugal: Post-mitigation impact of ~0.3% of GVA; ~€0.3BN

- UK: Post-mitigation impact of ~1.5% of GVA; ~€35 BN

Details on the following pages

Executive summaryCosts of Brexit for Iberia

3© Oliver Wyman

Tariffs and customs

We have estimated the ‘red tape’ cost of Brexit on both UK and EU companies and have not included other Brexit related impacts

Regulatory restrictions

Migration & talent

Tax treatment

FX movements

Business investment

Consumer spending

Impacts of Brexit on corporates

Directly linked to

Brexit outcomes

Indirectly linked to

Brexit outcomes

Most accurate to forecast Least accurate to forecastHow forecastable are

impacts on the business?

Nature of link to

Brexit negotiations RoW trade

Other (e.g. productivity)

UK reg. divergence

Focus for immediate Brexit

plans and impact assessment

(impact estimated in report)

Not included in

report impact

assessment

Pricing

1. We have assumed a smooth Brexit transition

Source: Oliver Wyman analysis

4© Oliver Wyman

Drivers of “red tape cost” Mitigation Post-mitigation cost

Cost of tariffs Cost of NTBs1 Adjusting operations Repatriation

Description Cost of reverting to WTO

tariffs for UK-EU trade

Impact of non-tariff

barriers on “red tape

cost” in WTO scenario

Mitigation of cost through

adjusting operations (e.g.

impact reduced through

building warehouse to

sustain JIT production)

Potential for reduction of

at the border Brexit

impact by localising some

operations

Remaining cost after

accounting for mitigation

Approach • European WTO tariff

rates mapped at a

granular product

classification level

• Tariffs applied to

export values, and

assumed to be borne

exclusively by the

exporter (no sharing of

cost)

• Non-tariff barriers

(NTB) from Clifford

Chance regulatory

sector briefings

• Behind the border

(BTB) cost estimates

informed by EC paper

quantifying NTBs for

US-EU trade across

selected sectors,

adjustment to CC

drivers in UK-EU

case, and public

benchmarks

• At the border (ATB)

cost estimates

quantified using public

sources

• Validated through

partner & client

interviews and surveys

• Mitigation split by

“behind the border”

(BTB) and “at the

border” (ATB) effects

• Limited ability to

mitigate BTB costs as

typically regulatory

• ATB on the other hand

can be mitigated

through investment in

IT systems at customs

or by warehousing at

borders to minimise

the impact of delays

(particularly in JIT

industries)

• Repatriation assumed

to mitigate tariffs and

NTB effects

• Accounts for both

localisation potential of

final production and

also of specific

suppliers

• Accounts for ~30% of

UK mitigation potential

and ~40% of EU

• Cost quantified for 20

actionable sectors

• Jobs impact of Brexit

red tape not quantified

• Industry research, Partner and client interviews

inform assessment of potential for mitigation

• Additional validation ongoing via client calls and

planned survey

Cost Post-mitigation costCurrent state

1

2

3

Cost is estimated by systematically assessing cost as a proportion of GVA and the potential for mitigation at a very granular level

1. Regulatory impact assumes major regulatory cliff-edges are not reached due to common interests of UK and EU27 – e.g. core scenario assumes a suitable solution is found for the regulation of UK air and aviation

product safety to allow the aviation sector to continue operating even if the UK is no longer formerly regulated by EASA, albeit with an increase in administrative burden reflected through NTB impact

Impact of Brexit

Comparison with other EU countries

Section 1

6© Oliver Wyman

Cost as a

% GVA2 Sector #1

Post-mitigation

cost

€ BN Sector #2

Post-mitigation

cost

€ BN

Concentration of cost

on top 5 impacted

sectors

0.4% Automotive 3.7Chemicals &

plastics 1.1 75%

0.8%Agriculture,

food & drinks 1.1Chemicals &

plastics 0.8 70%

1.1% Automotive 1.4Chemicals &

plastics 0.6 85%

0.2%Agriculture,

food & drinks 0.9Consumer

goods 0.6 70%

0.2%Consumer

goods 0.7Agriculture,

food & drinks 0.5 80%

0.3% Automotive 0.9Agriculture,


0.9%Agriculture,

food & drinks 0.9Chemicals &

plastics 0.3 75%

0.2% Automotive 0.2Agriculture,


0.3%Agriculture,

food & drinks 0.3 Industrials 0.1 80%

0.3%Consumer

goods 0.1 Automotive 0.1 75%

Post-mitigation cost per

country

€ BN

Cost of Brexit: European countries overviewWhile relative GVA impact is similar for both Iberian countries (~0.3%), absolute GVA amounts for €2.5 BN in Spain and €0.4 BN in Portugal

0.7

2.3

3.9

4.4

0.4

2.6

2.5

9.4

0.7

3.9

Germany

Netherlands

France

Italy

Spain

Ireland

Sweden

Denmark

Portugal

Belgium

1. Exchange rate used: 1 GBP = 1.2 EUR; 2. Pre-Brexit; Source: Eurostat, Oliver Wyman Analysis

Impact of Brexit

Spain

Section 2

8© Oliver Wyman

Spanish imports in goods & services from UK by sector

2016, € BN, %

Source: Oliver Wyman Analysis

• In 2016, Spain exported goods & services for ~€23 BN

to the United Kingdom

• UK is the 4th destination for Spain’s goods & services

exports

• Spain has a €8 BN trade surplus with the UK

• Export of goods & services categories to the UK (by

value) are concentrated; 40% are related to 2 key

sectors:

– Automotive (24%)

– Agriculture, food and drink (16%)

• On the other side, Spanish imports from the United

Kingdom amounted to ~€15 BN

Description

DEEP DIVE: SPAIN

Spanish exports in goods & services to UK by sector

2016, € BN, %

14% 13%9%

41%8%

8%

7%15

Status Quo of UK-Spain tradeUK is the 4th destination of Spain exports, 40% of the exported goods & services are concentrated in two sectors: Automotive and Food & drinks

24% 16% 8% 8% 8% 7% 30% 23

Electronics

Construction & Real EstateAviation

Consumer Goods

Automotive Aerospace

Creative industriesMetals & Mining

Agriculture, food and drink Others

9© Oliver Wyman

GVA1 impact potential, mitigation and residual impact

€ BN

Impact of Brexit: SpainTariffs and non-tariff barriers will add ~€3.1 BN of cost to Spanish firms, measures can be taken to mitigate ~€0.6 BN

870

872

874

876

878

880

882

884

886

Mitigation Post-Brexit

GVA

~€2,5bn

Post-

mitigation

GVA at risk

GVA at risk

at risk

Eco

no

mic

Acti

vit

y (

€B

N)

Non-tariff

barriers

TariffPre-Brexit

GVA - 2016

-0,3%

Costs in WTO scenario

Impact: ~€3.1 BN

• Tariffs: e.g. 8% tariff on alcoholic beverages, 10%

on motor vehicles

• Non-Tariff barriers

• “At-the-border”: Additional customs declarations

• “Behind-the-border”: e.g. dual certification due to

regulatory divergence between UK and EU

Mitigation potential

Potential: ~€0.6 BN

• Adjusting operations: Localise supply chains,

increase warehousing capacity to mitigate delays in

JIT production

• Repatriation: Reassess long-term global footprint

strategy, repatriate lines of business

Spanish firms that actively prepare for Brexit can mitigate ~20-25% of the impact1. Gross value added = Gross domestic product + subsidies on products – taxes on products


DEEP DIVE: SPAIN

10© Oliver Wyman

Preliminary estimates of the sectoral costs (goods + services) on the UK economy of tariff and non-tariff barriers in a

WTO scenario

Post-mitigation costs

Impact of Brexit: Spanish sector by sector costAerospace exports ~70% of production to the UK and therefore the relative impact is higher. But its absolute impact is smaller than Automotive

1. Exchange rate used: 1 GBP = 1.2 EUR

2. GVA cost (pre-mitigation) / Pre-Brexit GVA


0%

1%

2%

3%

4%

5%

0.0

0.2

0.1

0.3

0.5

0.8

0.4

0.9

0.6

0.7

Po

st-m

itigate

d im

pact €

MM

)

Energ

y

Constr

uction &

Real E

sta

te

Technolo

gy a

nd Info

rmation S

erv

ices

Pro

fessio

nal S

erv

ices (

inc. IP

)Po

st

mit

igate

d im

pact

(% o

f G

VA

)

Aero

space

Meta

ls &

Min

ing

Tra

nsport

, dis

trib

ution a

nd logis

tics

Agriculture

, fo

od a

nd d

rink

Chem

icals

and p

lastics

Auto

motive

Avia

tion

FS

Industr

ials

Consum

er

Goods

Life S

cie

nces

Ele

ctr

onic

s

€ MM

%

DEEP DIVE: SPAIN

11© Oliver Wyman

Distribution of sector costs – post-mitigation

€ BN

Impact of Brexit: Spain’s sector concentration~70% of the cost is in three sectors: Automotive; Agriculture, food & drink; and Consumer Goods

Chemicals

and plastics

148

544

Consumer Goods

133

OtherMetals & Mining

584

Agriculture,

food and drink

Automotive

242

886

DEEP DIVE: SPAIN

22

Pre-Brexit

GVA,

€BN76 45 14 7 717

Cost as

% of

Sector GVA

4.0% 0.8% 0.5% 1.0% 1.9% 0.1%


~70% of total

costs

12© Oliver Wyman

Impacts and mitigationOur analysis has identified key sector specific tariff and non-tariff barriers and steps that firms can take in order to mitigate their impact

1: VCA - UK Vehicle Certification Agency; 2. Calculated with pre-mitigation figures


DEEP DIVE: SPAIN

High sector specific impact Moderate sector specific impact Low sector specific impact

IndustryTariff and non-tariff impacts Mitigation

Tariffs NTBs Adjustment Repatriation

Automotive

2.4% GVA cost: 10% tariff

on motor vehicles, 4.5%

tariff on parts & vehicle

accessories

2.7% GVA cost: e.g.

double certification due to

potential lack of type

approval validity from

VCA1

Localize supply chain

Change to more local

suppliers or encourage

your suppliers to localize

Strategic UK investment

Bringing production closer

to demand to avoid tariffs

and use low FX for

strategic investment

Agriculture, food

and drink

0.4% GVA cost2: Low

(2.2%) tariffs on grains,

but very high (35%) tariffs

on dairy

0.6% GVA cost:

Additional administrative

burden, uncertainty about

divergence on food safety

standards

Adapt production

processes to ensure

compliance with food and

safety standards




on food items

Consumer goods0.2% GVA cost: 2.8%

tariff on textiles

0.4% GVA cost: Currently

aligned on CE mark,

waste, safety and

emissions standards.

Potential increase in

standards checks

Warehousing and buffer

stock

Foresee delays to JIT

production and plan ahead

Relocate (parts of the)

production to the EU


to demand and staying in

the EU

1

2

3

13© Oliver Wyman

DEEP DIVE: SPAIN

Spain’s 17 vehicles factoriesDestination of Spanish auto production

2016, thousand units

862

135

241

348

421425459

France TurkeyItalyUKSpain Germany RoW

Source: ANFAC2016

16% 15% 15% 12% 8%%

of total4%

Impact of Brexit: automotive industry regional deep-diveSpain, the second largest European producer of vehicles, exported 12% of its total production to the UK

30%

1

14© Oliver Wyman

Regions with largest absolute impactAutomotive good exports to the UK by region and

relation to total automotive exports of the region

2016, €BN

€1,50bn

€0,50bn

€0,00bn

€2,00bn

€1,00bn

Rest of

Spain

Aragón País

Vasco

Cataluña GaliciaCastilla

Y Leon

C.

Valenciana

• 97% of automotive

production is exported

• 21% of the automotive

exports are to the UK

Source: Government of Spain, Ministerio de Economía, Industria y Competitividad – Datacomex; ANFAC2016, Press releases

• Largest Seat

factory in the world –

84% of production

exported

• 11% automotive

exported to the UK

• ~45% of the region

goods exports are

in the automotive sector

• 12% of the automotive

exports are to the UK

21% 11% 12% 14% 9%% of exports

to the UK8% 6%

Impact of Brexit: automotive industry regional deep-diveCertain regions are heavily impact by Brexit due to high exposure to the UK market

1

DEEP DIVE: SPAIN

15© Oliver Wyman

Impact of Brexit: Spain’s sector concentrationMost of the cost comes from the export of finished cars

Distribution of sector cost

€ MM

Zoom on Automotive sector cost

Top-5 products, cost, € MM

544

133148

242

584

886

Consumer

Goods

OtherMetals &

Mining

Chemicals

and plastics

Agriculture,

food and drink

Automotive

80% of national cost 20%

DEEP DIVE: SPAIN


Spanish exports of vehicles for transport of persons and vehicles for transport of

goods are the most impacted by Brexit

413

Vehicles for

transport of

persons

MotorsVehicles for

transport of

goods

Motorcycles

629

161

79

Parts &

Accessories

1

16© Oliver Wyman

DEEP DIVE: SPAIN

Regions with largest absolute impactFoods & drinks goods exports to the UK by region and

relation to total food & drinks export of the region

2016, €MM

1.000

0

500

750

250

1.250

CataluñaAndalucía Castilla

La

Mancha

Murcia Navarra Rest of

Spain

C.

Valenciana

Impact of Brexit: Agriculture, food and drink regional deep-diveAndalucía, Murcia, Catalonia and Valencia are the largest exporters to the UK and the most exposed to the costs of Brexit

High impact regions

Source: Government of Spain, Ministerio de Economía, Industria y Competitividad – Datacomex; Press releases

Andalusia, Murcia and C.

Valenciana account for

84% of total Spanish fruit

and green vegetables

exports

2

10% 16% 6% 7% 20%

%

of total

exports

6% 6%

• 20% of Navarra’s food & drinks exports

go to the UK, 30% of it is wine (30%)

• Navarra’s highest commercial surplus is

with the UK – With an export/import ratio

of ~12x

17© Oliver Wyman

Impact of Brexit: Spain’s sector concentrationDeep-dive in impact in agriculture, food and drink sector


€ MM

Zoom on Agriculture, food and drink cost


544

133148

242

584

886

Consumer

Goods

OtherMetals &

Mining

Chemicals

and plastics

Agriculture,

food and drink

Automotive

80% of national cost 20%

DEEP DIVE: SPAIN


Spanish exports of fruits and vegetables are the most affected by the Brexit burdens

Fruit, preserved,

and fruit

preparations

Cereal

preparations

Fruits and nuts Alcoholic

beverages

Vegetables

24

152

56

23

140

2

18© Oliver Wyman

DEEP DIVE: SPAIN

Regions with largest absolute impactConsumer goods exports to the UK by region and

relation to total consumer goods exports of the region

2016, €MM

0

100

200

300

400

500

600

Cataluña Andalucía Rest of

Spain

AragónC. de

Madrid

Galicia C.

Valenciana

Impact of Brexit: Consumer goods regional deep-diveGalicia, Catalonia, Valencia and Madrid are the largest consumer goods exporters

• Inditex (owner of Zara)

accounts for ~30% of the total exports

of Galicia

• 9% of Galicia consumer goods exports

are sent to the UK

Source: Government of Spain, Ministerio de Economía, Industria y Competitividad – Datacomex; Press releases

3

9% 4% 6% 5% 5%

%

of total

exports

6% 5%

19© Oliver Wyman

Impact of Brexit: Spain’s sector concentrationDeep-dive in impact in consumer goods


€ MM

Zoom on consumer good cost


544

133148

242

584

886

Consumer

Goods

OtherMetals &

Mining

Chemicals

and plastics

Agriculture,

food and drink

Automotive

20% of national GVA 80%

DEEP DIVE: SPAIN


Spanish exports of men’s and boy’s clothing and articles of apparel are the most

impacted by Brexit

1616

24

28

54

Men’s or boy’s

clothing, of

textile, knitted,

croche.

Women’s

clothing, of

textile fabrics

Articles of

apparel, of textile

fabrics, n.e.s.

FootwearPerfumery,

cosmetics or

toilet prepar.

(excluding soaps)

3

20© Oliver Wyman

• In an internal report accessed by the press, the government of Spain states:

– Spain is aware of the importance of keeping UK as trading partner, since it is the 4th client and 7th supplier of the

Spanish economy, with a ~€8 BN trade surplus for Spain

– In addition, UK is the 1st investment destination for Spanish companies (€82 BN in 2016) and UK is the 2nd

investor in Spain (€45 BN)

– Once UK is out of the EU, main objective should be to maintain equal economic flows; avoid any “fiscal, social,

environmental and regulatory policies that can distort competition”; and do not grant the UK “more benefits than

those that it is willing to offer back on a fair reciprocity basis” in order to “avoid encouraging the departure of other

members”

– On the bilateral negotiations, “Spain must reach an agreement with the UK to avoid Spanish exports being

substituted by products from third countries with which the UK can have more advantageous commercial

agreements”

– UK proposal of a “new customs arrangement” as an independent agreement of the trade agreement, would be

unacceptable

• The Spanish companies association (CEOE) conducted a survey in 2016 that revealed:

– 43% of the companies are developing a Brexit contingency plan with the financial services sector being the first to

react (55% have already developed a plan), followed by the construction sector (33% already with a plan)

– 20% of Spain’s executives see the Brexit as an opportunity rather than a threat

• Regarding the public opinion, Spain is the 2nd country (after Poland) with more citizens, 64%, in favour of UK

staying in the EU

Spanish authorities and businesses community view on Brexit

Both Spanish authorities and businesses have shown their concerns regarding the Brexit impact and are taking steps to address it

Impact of Brexit

Portugal

Section 3

22© Oliver Wyman

Portuguese imports in goods & services to UK by sector

2016, € BN, %

Source: Eurostat, Oliver Wyman Analysis

• In 2016, Portugal exported goods for ~€4 BN to the

United Kingdom, making the UK its fourth largest market

into the EU, although is less than a third if compared to

Spain

• Portugal has a trade surplus of €2 BN with the UK

• Export categories to the UK (by value) are concentrated;

~50% are related to 5 key sectors:

– Consumer Goods (16%)

– Automotive (16%)

– Industrials (12%)

– Aviation (9%)

– Agriculture, food and drink (9%)

• On the other side, Portuguese imports of goods from

the United Kingdom amounted to ~€2 BN in 2016

Description

DEEP DIVE: PORTUGAL

Portuguese exports in goods & services to UK by sector

2016, € BN, %

16% 16% 12% 9% 9% 8% 31% 4

Metals & Mining

Consumer Goods

Aviation

Industrials

Automotive

Electronics

Others

FS

Life Sciences

Agriculture, food and drink

Status Quo of UK-Portugal trade~50% of the €4 BN of goods & services exported from Portugal to UK concentrated in four industries

37% 29%11% 8%

10%12% 8% 6%

23© Oliver Wyman

Post-mitigated cost of Brexit

€ BN

Impact of Brexit: PortugalTariffs and non-tariff barriers will put ~€0.5 BN of costs in Portugal; firms can take measures to mitigate ~€80 MM

136

138

140

142

144

146

Mitigation Post-Brexit

GVA

Eco

no

mic

Acti

vit

y (

€B

N)

Tariff Non-tariff

barriers

Pre-Brexit

GVA - 2016

Post-

mitigation

GVA at risk

GVA at risk

at risk

-0,2%

~€0,3bn

Costs in WTO scenario

Impact: ~€0.5 BN

• Tariffs: e.g. 8% tariff on alcoholic beverages, 10%

on motor vehicles

• Non-Tariff barriers

• “At-the-border”: Additional customs declarations

• “Behind-the-border”: e.g. dual certification due to

regulatory divergence between UK and EU

Mitigation potential

Potential: ~€80 MM

• Adjusting operations: Localise supply chains,

increase warehousing capacity to mitigate delays in

JIT production

• Repatriation: Reassess long-term global footprint

strategy, repatriate lines of business

Portuguese firms that actively prepare for Brexit can mitigate ~20% of its impact1. Gross value added = Gross domestic product + subsidies on products – taxes on products


DEEP DIVE: PORTUGAL

24© Oliver Wyman

Distribution of sector costs – post-mitigation

€ MM

Impact of Brexit: sector concentration~75% of cost is concentrated in 5 sectors: Consumer goods; Automotive; Agriculture, food and drink; Chemical and plastics; and Industrials

104

3536

57

9092

Chemicals

and plastics

Agriculture,

food and drink

Industrials OtherAutomotiveConsumer Goods

DEEP DIVE: PORTUGAL

9

Pre-Brexit

GVA,

€BN3 11 2 6 112

Cost as

% of

Sector GVA

1.0% 2.7% 0.5% 1.7% 0.6% 0.01%


Represent ~75% of

Portuguese cost

25© Oliver Wyman

Portuguese cost by sectorAutomotive will likely be the most distressed sector since it has the second highest GVA impact (~€90 MM) and highest relative cost (2.7%)

0%

1%

2%

3%

0

10

20

30

40

50

60

70

80

90

100

Po

st-m

itigatio

n c

ost (€

MM

)

Chem

icals

and p

lastics

Constr

uction &

Real E

sta

te

Avia

tion

FS

Meta

ls &

Min

ing

Consum

er

Goods

Agriculture

, fo

od a

nd d

rink

Pro

fessio

nal S

erv

ices (

inc. IP

)

Po

st-

mit

igati

on

co

st

(as a

% o

f G

VA

Technolo

gy a

nd Info

rmation S

erv

ices

Tra

nsport

, dis

trib

ution a

nd logis

tics

Industr

ials

Aero

space

Ele

ctr

onic

s

Auto

motive

Life S

cie

nces

1. Exchange rate used: 1 GBP = 1.2 EUR


% of GVA2

GVA at risk (EUR MM)

Preliminary estimates of the sectoral costs (goods + services) on the UK economy of tariff and non-tariff barriers in a

hard WTO scenario

Post-mitigation costs

DEEP DIVE: PORTUGAL

26© Oliver Wyman

Impact of Brexit: Portugal’s sector concentrationDeep-dive in impact in consumer goods sector


€ MM

Zoom on consumer goods costs


104

3536

57

9092

IndustrialsChemicals

and plastics

Consumer

Goods

Automotive OtherAgriculture,

food and drink


DEEP DIVE: PORTUGAL


Portuguese exports of clothing/apparel and footwear are the most affected by the

Brexit burdens

999

11

14

Furniture & partsMen’s or

boy’s clothing

Articles of

apparel

Clothing

accesories

Footwear

27© Oliver Wyman

Impact of Brexit: Portugal’s sector concentrationDeep-dive in impact in the automotive sector


€ MM

Zoom on automotive costs


104

3536

57

9092

OtherAgriculture,

food and drink

Consumer

Goods

IndustrialsAutomotive Chemicals

and plastics


DEEP DIVE: PORTUGAL


Portuguese exports of vehicles for transport of persons and parts/accessories of

vehicles will me most impacted by Brexit

24

7

34

42

Parts of vehicles MotorcyclesMotor vehicles

for transport of

persons

Motor vehicles

for transport of

goods

Road motor

vehicles

28© Oliver Wyman

Impact of Brexit: Portugal’s sector concentrationDeep-dive in impact in the agriculture, food and drink sector


€ MM

Zoom on Agriculture, food and drink cost


104

3536

57

9092

OtherAgriculture,

food and drink

Consumer

Goods

IndustrialsAutomotive Chemicals

and plastics


DEEP DIVE: PORTUGAL


Portuguese exports of alcoholic beverages and fish products are the most impacted

by Brexit

55

7

1112

Fish, aqua.

invertebrates,

prepared,

preserved

Fruits and nuts

(excluding oil

nuts), fresh or

dried

Alcoholic

beverages

Vegetables,

roots, tubers,

prepared,

preserved

Edible products

and preparations

29© Oliver Wyman

Impacts and mitigationOur analysis has identified key sector specific tariff and non-tariff barriers and steps that firms can take in order to mitigate their impact

IndustryTariff and non-tariff impacts Mitigation

Tariffs NTBs Adjustment Repatriation

Agriculture, food and drink

0.4% GVA cost2: Low

(2.2%) tariffs on grains,

but very high (35%) tariffs

on dairy

0.6% GVA cost:

Additional administrative

burden, uncertainty about

divergence on food safety

standards

Adapt production

processes to ensure

compliance with food and

safety standards




on food items

Automotive

2.4% GVA cost: 10% tariff

on motor vehicles, 4.5%

tariff on parts & vehicle

accessories

2.7% GVA cost: e.g.

double certification due to

potential lack of type

approval validity from

VCA1

Localise supply chain

Change to more local

suppliers or encourage

your suppliers to localise




and use low FX for

strategic investment

Consumer goods0.2% GVA cost: 2.8%

tariff on textiles

0.4% GVA cost: Currently

aligned on CE mark,

waste, safety and

emissions standards.

Potential increase in

stan¡dards checks

Warehousing and buffer

stock

Foresee delays to JIT

production and plan ahead

Relocate (parts of the)

production to the EU


to demand and staying in

the EU

1: VCA - UK Vehicle Certification Agency; 2. Calculated with pre-mitigation figures


DEEP DIVE: PORTUGAL

High sector specific impact Moderate sector specific impact Low sector specific impact

30© Oliver Wyman

• Portugal is doing active efforts to attract investment from UK companies, trying to take advantage of the

uncertainty created by Brexit

– Portuguese government has created the cabinet ‘Portugal In’, a temporary structure that will report directly

to prime minister and whose goal is to attract investments that want to stay in the EU after the United

Kingdom’s exit

– Several representatives of Portuguese companies and government have visited London during the last

two years as part of their plan to lure investment

– Portugal’s economy minister said in Davos that Brexit is boosting Portugal’s economy “since more shared

services are looking at Lisbon and beyond to place their activity”, “We’re obviously viewing Brexit like

everyone in Europe, with some apprehension and attention, but also looking at the opportunities that

might open”

Portuguese authorities and businesses community view on Brexit

Portugal has been one of the EU countries that has most explicitly outlined the potential opportunities that might arise from Brexit

Other analysisAppendix

32© Oliver Wyman

Cost per industry per country in scope

€ MM

Brexit Impact per countryWhile Portuguese GVA cost is moderately small (€390 MM), Spain is the fifthin terms of GVA impact (~€2.4 BN)


DEEP DIVE: IBERIA

Aerospace 224 24 173 47 106 48 44 7 3 2

Agriculture, food and drink 833 517 844 510 550 1 038 878 134 274 54

Automotive 3 451 1 428 477 364 835 329 28 156 13 84

Aviation 24 7 44 19 51 18 16 4 7 10

Chemicals and plastics 1 053 582 502 205 139 740 278 58 36 34

Construction & Real Estate 85 30 37 50 26 33 36 13 9 5

Consumer Goods 681 401 573 624 228 404 156 36 84 86

Creative Industries & Other

Service Activities 5 2 4 2 1 2 2 1 0 0

Electronics 303 77 102 67 34 353 87 20 17 27

Energy 5 65 13 1 2 39 1 1 2

FS 204 55 238 63 58 183 158 26 13 10

Hospitality, Leisure and

Tourism 0 0 0 0 0 0 0 0 0 0

Industrials 803 166 257 293 103 302 77 96 94 33

Life Sciences 526 391 148 80 42 449 203 20 17 11

Metals & Mining 434 131 90 111 125 104 42 59 16 14

Professional Services (inc. IP) 132 47 118 25 29 84 106 33 16 4

Public Services 0 0 0 0 0 0 0 0 0 0

Technology & Info. Services 41 6 27 8 9 21 32 10 2 1

Transport, distrib. & logistics 67 8 50 25 52 33 17 8 14 12

Utilities & environment.

sciences 0 0 0 0 0 0 0 0 0 0

Total 8 873 3,936 3 698 2 493 2 390 4 180 2 161 682 616 390

DEU FRA ITA ESP NLD IRL SWE DNK PRTBE

33© Oliver Wyman

Cost (as % of GVA) per industry per country in scope

Brexit Impact per countryBrexit’s impact in Iberia, measured as a % of GVA, is homogeneous around0.3% of pre-Brexit GVA

DEEP DIVE: IBERIA

Aerospace 2.9% 4.4% 1.8% 1.3% 4.7% 4.7% 0.0% 0.7% 1.9% 2.1%

Agriculture, food and drink 0.6% 2.5% 0.8% 0.6% 0.8% 2.6% 5.5% 0.7% 2.2% 0.5%

Automotive 2.5% 14.4% 1.2% 1.5% 4.0% 3.0% 1.6% 1.2% 0.3% 2.7%

Aviation 0.2% 0.3% 0.4% 0.4% 0.8% 0.3% 0.6% 0.3% 0.5% 0.7%

Chemicals and plastics 1.7% 5.8% 2.0% 1.0% 1.0% 6.7% 2.1% 1.2% 1.0% 1.7%

Construction & Real Estate 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 0.0% 0.0%

Consumer Goods 0.5% 2.3% 0.8% 0.9% 0.5% 1.4% 1.6% 0.2% 0.8% 1.0%

Creative Industries & Other

Service Activities 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 0.0% 0.0%

Electronics 0.5% 1.9% 0.5% 0.3% 0.4% 4.3% 1.0% 0.4% 0.5% 1.8%

Energy 0.0% 1.0% 0.0% 0.0% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0%

FS 0.2% 0.2% 0.3% 0.1% 0.2% 0.4% 1.0% 0.2% 0.1% 0.1%

Hospitality, Leisure and

Tourism 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Industrials 0.5% 1.2% 0.4% 0.4% 0.3% 1.1% 0.6% 0.5% 0.8% 0.6%

Life Sciences 1.1% 4.0% 0.6% 0.4% 0.4% 5.0% 1.2% 0.3% 0.2% 0.7%

Metals & Mining 1.7% 4.1% 1.1% 1.1% 1.9% 3.1% 5.8% 1.7% 1.7% 2.2%

Professional Services (inc. IP) 0.1% 0.1% 0.1% 0.0% 0.0% 0.1% 0.2% 0.1% 0.1% 0.0%

Public Services 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Technology & Info. Services 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% 0.0% 0.0%

Transport, distrib. & logistics 0.1% 0.1% 0.1% 0.0% 0.1% 0.1% 0.4% 0.1% 0.1% 0.2%

Utilities & environment.

sciences 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total 0.4% 1.1% 0.2% 0.2% 0.3% 0.8% 0.9% 0.2% 0.3% 0.3%

DEU FRA ITA ESP NLD IRL SWE DNK PRTBE


34© Oliver Wyman

Sector

GVA (£ BN) Bilateral trade (£ BN)

UK ESP UK ESP ESP UK

Aerospace ~10 ~1 ~0.6 ~1.4

Agriculture, food & drink ~95 ~64 ~1.1 ~3.0

Automotive ~60 ~18 ~1.6 ~4.6

Aviation ~15 ~6 ~0.3 ~1.4

Chemicals & Plastics ~20 ~12 ~0.9 ~0.8

Construction & Real Estate ~365 ~132 ~0.1 ~0.5

Consumer Goods ~85 ~37 ~0.6 ~1.5

Creative Industries & Other ~50 ~12 ~0.3 ~0.2

Electronics ~15 ~8 ~0.4 ~0.4

Energy ~55 ~23 ~0.6 ~0.1

Financial Services ~115 ~33 ~1.8 ~0.2

Hospitality, leisure & tourism ~100 ~48 ~0 ~0

Industrials ~55 ~27 ~0.9 ~1.1

Life Sciences ~25 ~11 ~0.7 ~0.4

Metals & Mining ~5 ~6 ~1.0 ~1.4

Professional Services (inc. IP) ~190 ~69 ~0.7 ~0.9

Public Services ~320 ~161 ~0.1 ~0

Technology and Info. services ~80 ~22 ~0.4 ~0.2

Transport, distribution & logistics ~65 ~35 ~0.2 ~0.9

Utilities & Environmental Sciences ~20 ~8 ~0 ~0

Total across all sectors ~1,745 ~735 ~12 ~19

UK and ESP current economic state across GVA and bilateral trade by industry sector

2016, £

Current stateOur analysis of the current state of trade in goods and services highlights the sectors most exposed to ESP-UK trade

Source: ONS 2016, Eurostat 2016, Oliver Wyman Research & Analysis

DEEP DIVE: SPAIN

35© Oliver Wyman

Sector

GVA Tariffs NTB Costs

ESP (€ MM) ESP (€ MM) ESP (€ MM) ESP (€ MM) % of GVA

Aerospace2,100 28 136 106 4.7%

Agriculture, food & drink71,400 289 411 550 0.8%

Automotive19,900 504 550 835 4.0%

Aviation6,300 0 51 51 0.8%

Chemicals & Plastics13,500 43 112 139 1.0%

Construction & Real Estate149,600 6 31 26 0.0%

Consumer Goods42,100 100 159 228 0.5%

Creative Industries & Other 13,600 0 1 1 0.0%

Electronics9,500 5 36 34 0.4%

Energy26,000 0 3 2 0.0%

Financial Services37,600 0 58 58 0.2%

Hospitality, leisure & tourism54,600 0 0 0 0.0%

Industrials30,500 23 101 103 0.3%

Life Sciences11,900 0 52 42 0.4%

Metals & Mining6,300 17 134 125 1.9%

Professional Services (inc. IP)77,400 0 29 29 0.0%

Public Services181,600 0 0 0 0.0%

Technology and Info. services25,300 0 9 9 0.0%

Transport, distribution & logistics39,600 1 65 52 0.1%

Utilities & Environmental Sciences9,400 0 0 0 0.0%

Total across all sectors828,200 1,015 1,939 2,390 0.3%

Tariff and non-tariff impact of Brexit: SpainFrom a sector perspective, the Spanish aerospace and automotive industries will be most impacted by Brexit

DEEP DIVE: SPAIN

Source: Eurostat 2016, Destatis, Oliver Wyman Analysis

36© Oliver Wyman

Sector

GVA (£ BN) Bilateral trade (£ BN)

UK PT UK PT PT UK

Aerospace ~10 ~0 ~0 ~0

Agriculture, food & drink ~95 ~9 ~0.2 ~0.2

Automotive ~60 ~3 ~0.2 ~0.5

Aviation ~15 ~1 ~0 ~0.3

Chemicals & Plastics ~20 ~2 ~0.1 ~0.2

Construction & Real Estate ~365 ~2 ~0 ~0.1

Consumer Goods ~85 ~23 ~0.2 ~0.5

Creative Industries & Other ~50 ~8 ~0.2 ~0

Electronics ~15 ~2 ~0.4 ~0.3

Energy ~55 ~1 ~0.1 ~0

Financial Services ~115 ~9 ~0.2 ~0

Hospitality, leisure & tourism ~100 ~6 ~0 ~0

Industrials ~55 ~5 ~0.2 ~0.4

Life Sciences ~25 ~1 ~0.1 ~0.1

Metals & Mining ~5 ~1 ~0.1 ~0.2

Professional Services (inc. IP) ~190 ~9 ~0.1 ~0.1

Public Services ~320 ~27 ~0 ~0

Technology and Info. services ~80 ~3 ~0 ~0

Transport, distribution & logistics ~65 ~4 ~0 ~0.2

Utilities & Environmental Sciences ~20 ~1 ~0 ~0

Total across all sectors ~1,745 ~121 ~2 ~2

UK and PT current economic state across GVA and bilateral trade by industry sector

2016, £

Current stateOur analysis of the current state of trade in goods and services highlights the sectors most exposed to PT-UK trade

Source: ONS 2016, Eurostat 2016, Oliver Wyman Research & Analysis

DEEP DIVE: PORTUGAL

37© Oliver Wyman

Sector

GVA Tariffs NTB Costs

PT (€ MM) PT (€ MM) PT (€ MM) PT (€ MM) % of GVA

Aerospace100 1 3 2 2.1%

Agriculture, food & drink11,200 32 40 57 0.5%

Automotive3,300 47 67 90 2.7%

Aviation1,500 0 11 11 0.7%

Chemicals & Plastics2,200 12 28 36 1.7%

Construction & Real Estate27,000 2 6 5 0.0%

Consumer Goods9,400 41 63 92 1.0%

Creative Industries & Other 2,000 0 0 0 0.0%

Electronics1,600 7 27 29 1.8%

Energy5,200 0 0 0 0.0%

Financial Services10,800 0 11 11 0.1%

Hospitality, leisure & tourism7,600 0 0 0 0.0%

Industrials6,200 7 36 35 0.6%

Life Sciences1,700 0 15 12 0.7%

Metals & Mining700 1 16 15 2.2%

Professional Services (inc. IP)11,300 0 5 5 0.0%

Public Services31,800 0 0 0 0.0%

Technology and Info. services4,200 0 1 1 0.0%

Transport, distribution & logistics5,200 1 15 13 0.2%

Utilities & Environmental Sciences1,500 0 0 0 0.0%

Total across all sectors144,500 150 345 414 0.3%

DEEP DIVE: PORTUGAL

Source: Eurostat 2016, Destatis, Oliver Wyman Analysis

Tariff and non-tariff impact of Brexit: PortugalIn terms of gross value, consumer goods and automotive will be most affected by Brexit

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