How will Brexit affect EU and China?

In the six months since the United Kingdom voted to leave the European Union, the impact on EU's economy has been barely noticeable. A small dip in economy-wide confidence in July and August quickly reversed, and a modest recovery across the region has continued uninterrupted. Looking forward, indicators of activity even suggest that business activity is picking up.

However, economic and political risks are likely to intensify next year, once the UK government formally begins the process of withdrawing from the EU. In the UK, the Brexit negotiations will generate uncertainty about the short - and medium-term economic outlook for the country. Combined with a sharp rise in costs stemming from the pound's depreciation in 2016, this is likely to result in a slump in domestic demand and a slowdown in the pace of economic growth in 2017.

For Europe, the projected economic slowdown in the UK will undermine export revenue in countries with the largest trade exposures, notably Ireland, the Netherlands, Belgium and Cyprus. Most other EU countries have modest trade ties with the UK, but those with foreign direct investment in the UK or close links to its banking sector may also be adversely affected, including Cyprus, France, Belgium, the Netherlands, Germany, Finland, Greece and Spain.