UPDATE 2-German firms would face billions in extra tariffs in hard Brexit -study

A hard Brexit would result in extra tariffs of more than 3 billion euros ($3.4 billion) for German companies per year, a German institute said on Tuesday, and German exports to Britain might drop by up to 57 percent.

Talks on ending four decades of Britain's membership in the European Union have entered their final stage more than two years after Britons voted for Brexit. A hard Brexit would mean Britain leaving the bloc with no trade deal.

Britain and the EU are eyeing significant progress in negotiations at an Oct. 17-18 summit.

The BDI industry association - one of Germany's most influential lobby groups - said a breakthrough in Brexit negotiations was needed at that summit.

"Otherwise there is the risk that Europe slides into a disorderly Brexit and that would cause a huge crisis," Managing Director Joachim Lang said.

A hard Brexit would cause huge difficulties for tens of thousands of companies in Europe and hundreds of thousands of employees in Britain and the European Union, Lang said.

He noted that many companies were preparing for a hard Brexit and some wanted to suspend production in Britain from April as delivery routes could not be secured.

The IW institute in Cologne said a hard Brexit would affect the auto sector - which employs some 800,000 people in Germany and is the country's biggest exporter - particularly hard as it would be hit with about 60 percent of those extra costs.

About 5 percent of Germany's gross domestic product depended either directly or indirectly on trade with Britain, IW said, making it the third biggest trading partner for German firms.

"That could dramatically change in the foreseeable future," the IW study said.

Referring to a potential plunge in German exports to Britain if a hard Brexit happens, IW researcher Markos Jung said: "This horrific scenario should force politicians to act constructively."

In the long term, a hard Brexit would probably result in price rises and a shift in Germany's flow of goods, the IW said. ($1 = 0.8715 euros) (Reporting by Michelle Martin Editing by Louise Ireland)

(With inputs from agencies.)