(Bloomberg) --
Italian companies doing business with the U.K. would be hit hard if Brexit trade talks don't yield an agreement, according to export agency SACE.
Under new tariffs, sales of Italian goods to Britain could contract 12.1% next year, with exports of mechanical instruments, electrical and electronic equipment and transport goods dropping as much as 27.6%.
Should trade negotiations between the European Union and the U.K. go well, however, exports could climb 5.3% in 2021, the Italian agency said in a study.
Britain and the EU are locked in talks over a deal on their future relationship, and companies scarred by months of shutdowns and lower sales due to the pandemic are closely watching the outcome.
The U.K. will continue efforts to reach an agreement with the EU beyond Prime Minister Boris Johnson's Oct. 15 deadline, according to a person close to the negotiations. Johnson will make his decision after EU leaders meet for a summit in the coming days.
Failure to secure an accord would mean Britain loses frictionless, duty-free access to the EU and the two sides would immediately revert to World Trade Organization rules.
Read more: U.K. Won't Walk Away From EU Trade Talks Immediately
The two are important commercial partners, with the U.K. in fifth place as importer of Italian goods, according to the study. In 2019 sales of Italian goods to the U.K. increased 4.7% to 25 billion euros ($29 billion), more than the increase in Italian exports overall that year.
Failure to clinch a trade deal would also hit services and foreign direct investment, which totaled 33 billion euros last year, the report said.
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