A no-deal Brexit would cost UK and EU firms £58 billion (€65bn) a year, but the cost could be just £31 billion if the UK stayed in a customs union.
Those were the findings in a flash analysis published by Oliver Wyman, a British consultancy, and Clifford Chance, a law firm, on Monday (11 March).
They said the extra costs would arise from tariff and non-tariff, or regulatory, barriers to trade linked to the imposition of World Trade Organisation rules instead of the EU single market rules in place today.
British firms would face £27 billion of costs and EU27 ones a £31 billion bill in the no-deal scenario, while the split would be £17 billion and £14 billion in the customs union one.
The costs would hit five UK sectors the hardest - chemicals and plastics, metals and mining, aerospace, financial services, and life sciences.
On the EU side, they would affect mostly the aerospace, automative, chemicals and plastics, metals and mining, and life science sectors.
They would be felt mostly keenly in London in the UK and in four German regions with a concentration of automative and manufacturing companies - Bavaria, Baden-Wuerttemberg, North Rhine-Westphalia, and Lower Saxony. They would also be felt keenly in the Irish agricultural sector.
The report warned that even if the UK stayed in a customs union, firms trading in goods would benefit more than those in services, especially financial services, as the customs union does not cover these areas.
It added that small British firms, which have little or no experience of trading outside the EU would suffer the most.
"Small firms that today have no non-EU trade will need to establish and run processes that are entirely new to them," it said.
About 60 percent of British firms with fewer than 10 employees traded exclusively within the EU, it noted, and about 37 percent of those with 10 to 49 employees were in the same boat, it said.
