Malta may be one of the big losers from Brexit if this leads to poor economic relations between the UK and the EU, new research by KPMG suggests. 

KPMG’s chief economist Yael Selfin looked at the EU27 countries most impacted from any future restrictions on trade in goods, services and the movement of labour.  The research shows that nearly all of the EU27 have important links to the UK, with countries like Ireland, Cyprus, Malta and Luxembourg potentially with the most at stake,” Ms Selfin said.

The Brexit impact on Malta ranks high for goods and services exported to the UK, and Maltese residents living in Britain. KPMG said Brexit would have medium impact on British citizens living in Malta since the island needed the foreign workforce.

The study published last month but only released by KPMG UK this week, shows that Malta was the third most exposed country to the UK for exporting goods, making it vulnerable to any trade barriers. 

Although the figures are insignificant for the British economy, export of goods to the UK are worth nine per cent of Malta’s GDP.  Ireland and Luxembourg were the most exposed to the British economy with the value of exports to the UK making up 14 per cent and 10 per cent of domestic GDP respectively. 

The research also shows that Malta was the second most exposed, after Cyprus, to the British economy for the export of services. These account for 6.4 per cent of GDP. 

Ms Selfin said the analysis shows how different EU countries might be approaching Brexit negotiations as they draw their own red lines. British Prime Minister Theresa May is expected to trigger Article 50 of the EU Treaty to start exit talks by the end of this month. 

While there is widespread agreement among EU27 that the four freedoms underpinning the single market – free movement of goods, services, capital and people – should not be considered separately in any talks with Britain, there is a lack of consensus on what the deal should be. 

The KPMG study shows that the EU’s largest economies – Germany, France and Italy – face some risks to their exports of goods, while for Spain curtailing the inflow of holidaymakers may prove undesirable.  KPMG did concede that the effect on domestic economies of migration as a result of Brexit “may be ambiguous”. 

While Poles form the largest community of EU nationals resident in the UK, amounting to 700,000, they only account for just 1.8 per cent of Poland’s population. On the flip side, the number of Maltese residents in the United Kingdom make up 7.6 per cent of Malta’s population. 

KPMG said that for many Eastern European countries, protecting the workers in the UK and their remittances may be the most important priority during Brexit negotiations.  

Ms Selfin said with all 27 countries needing to approve any deal, which must also be accepted by the UK, it still had to be seen whether a mutually agreeable position could be reached within two years.  “Collectively, the EU has a lot to lose from a breakdown in economic relationships with the UK and, if it can work together towards a solution based on economic facts rather than domestic politics, many of the potential negative consequences of Brexit may be averted,” the study concluded.

Amended 10.05am - A previous version of this article mistakenly referred to Yael Selfin as 'Mr' rather than 'Ms'.