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Brexit Could Bring Economic Problems to EU Countries

Vehicles drive past an anti-Brexit sign that is placed near the Parliament in London, Jan. 29, 2019.
Vehicles drive past an anti-Brexit sign that is placed near the Parliament in London, Jan. 29, 2019.
Brexit Could Bring Economic Problems to EU Countries
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Workers at the Pedrosa & Rodrigues clothing factory in Portugal are worried that something 2,000 kilometers away could endanger their jobs.

Sales to Britain make up about half of this family business’s yearly earnings of about 14 million euros. But a British withdrawal from the European Union could make products from Portugal more costly.

The factory could possibly lose up to 7 million euros a year, says Ana Pedrosa Rodrigues, who works with buyers of the company’s products. “It would be extremely worrying.”

Businesses like Pedrosa & Rodrigues fear they could be hurt by Brexit – Britain’s exit from the EU’s single market.

The single market ensures that there are no tariffs on trade and free movement for goods, workers and money. As Brexit-related economic changes hit Europe, small countries like Portugal could be badly hurt. But no one is sure about the exact effects because the terms of Brexit have yet to be decided.

Some economic predictions are worrisome. Portugal says Brexit could destroy up to 26 percent of Portuguese exports of goods and services and take 1 percentage point off the country’s Gross Domestic Product (GDP).

The Organization for Economic Co-operation and Development (OECD) serves as a policy adviser to developed economies. It estimates that if Britain leaves without an agreement on new trade terms with the EU, it could reduce the EU’s GDP by about 1 percentage point by 2020. That represents more than half a year’s economic growth at current rates. It could be three times worse for Britain, the OECD says.

The organization also said that some countries and businesses across the EU will feel more pain than others.

Last year, the European Committee of the Regions said Ireland would be greatly hurt by Brexit because it is so close to Britain. That closeness has tied their economies.

Cities like Stuttgart, in Germany, could also have economic problems, it said. The automobile industry in and around Stuttgart earns a lot from exports to Britain. Chemical and plastics companies in Belgium and the Netherlands also are at risk, the committee said.

Portugal has had close ties with Britain since the Treaty of Windsor in 1386. The Portuguese textile industries could be badly hurt. Its factories are based in one of the poorest areas in Portugal and Western Europe.

The textile companies have already experienced problems. Sales to Britain have fallen by more than 3 percent since the 2016 Brexit decision, according to Paulo Vaz. He is the director-general of the Portuguese Textile and Clothing Association, which represents about 500 textile companies.

Vaz noted that one reason for the drop in sales is weakness in the value of British money, the pound. This makes purchases from countries like Portugal that use the euro more costly. It is also because of worried British businesses and citizens who are cutting back on purchases as Brexit nears.

The Pedrosa & Rodrigues factory sits on the end of a small town in Portugal’s industrial center, where textile companies make about 130,000 jobs.

Ana Pedrosa Rodrigues remembers when her parents started the company with five employees in 1982.

She and her two older brothers recently joined their parents at the company. The other employees include husbands and their wives, fathers and sons, brothers and sisters. Almost all of the workers live in town.

A loss of British business would create job losses.

Sofia Cardoso and her husband both work at the company. She is not afraid.

“We’ve been through crises before and we’ve survived,” she said. “I think we’ll get through this one, too.”

The Associated Press' Barry Hatton reported this story. Susan Shand adapted it for VOA Learning English. George Grow was the editor.

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Words in This Story

tariffs – n. a tax on goods coming into or leaving a country

Gross Domestic Product – n. the value of goods manufactured and services provided in a country during a year

textile – n. a fabric that is woven or knit

according – adv. as stated by or in