'No Deal' Brexit Implications


I am sure you have heard me speak about the importance of the UK avoiding a No Deal on the 29th of March. A no deal would be utterly catastrophic for the UK.

In brief, if we have no formal deal on the 29th of March, or we have not revoked or extended article 50, there will be no transition period. That means on the 30th of March we will have no security arrangements, no travel or visa systems, full third country tariffs, no medicine recognition, goods and medical supplies will not flow and there will be hard border installed in Ireland.


The Government recently published a document that presents the implications of a No-Deal Brexit following a proposed amendment from Anna Soubry MP which was backed by Chuka Umunna, both colleagues of mine in The Independent Group.   

I have summarised key points the document makes on the impact of a no deal, on citizens, the economy, border controls, trade, business and Northern Ireland. A full copy of the published papers can be viewed following this link 


Citizens

UK nationals living in an EU member state with less than 5 years of residency will be subject to the rules of the member state, including immigration.


Economic


Short term:

There was no comment or analysis on the effect a ‘no deal’ Brexit would immediately have on the economy as the Government have stated there is too much uncertainty to predict the consequences. However, the Bank of England have cut its 2019 growth forecast from 1.7% to 1.2% attributing one of the causes to Brexit uncertainty. They have also predicted a 25% chance of a recession.


Long term:

In 15 years the UK economy will still be feeling the effect of a ‘no deal’ Brexit. The overall UK economy would be 6.3-9% smaller than if we left with a deal. There would be further variation across the whole of the UK with the economy of Wales shrinking by 8.1%, Northern Ireland by 9.1%, Scotland by 8.0% and the North East of England by 10.5%.


Border

The availability of goods will be affected by a ‘no deal’ Brexit as the customs administration process will cause border delays. If the UK leaves with no deal, third country customs rules would apply. This means no goods would be allowed to leave the port until all paperwork had been provided and goods had been customs cleared. As a result of the lack of business readiness, flow of goods would be significantly reduced for months.

30% of the UK’s food supply comes from the EU, the delays at the border would result in reduced availability. Due to the time of year, the availability of fresh fruit and vegetables would be specifically affected. 

 

Businesses

Around 240,000 UK businesses who trade solely with the EU would have to engage with the customs process. HMRC have estimated this could cost £13 billion per annum in administrative costs.

There would be a gap in lawful free flow of personal data affecting many UK businesses with EU partners. The EU have said they will not make arrangements around this issue until the UK is a 3rd country.


Trade

The UK would automatically revert to World Trade Organisation rules on trade. The UK would no longer be by bound by EU rules, but the UK would be subject to tariffs imposed by the EU.


It is likely the EU would introduce tariffs of around 70% on beef, 45% on lamb, and 10% on automotive vehicle exports. This would have a detrimental impact on businesses who would become subject to high tariffs imposed by the EU. Consumers would also expect to see a rise in the prices of goods.


Example:

In 2018 81.5% of vehicle production in the UK were exported. 42.8% of these exports were to EU member states. If the EU were to impose a 10% tariff on finished vehicles and 2.5-4% on components, this would have an effect on both consumers and companies.  


Additionally, the UK would have to negotiate a new trade agreement with EEA countries who have trade deals in place with the EU, but not with the UK.

It is impossible to predict the ability of businesses to adapt but it is likely to be costly and uncertain.


Northern Ireland

The effect on Northern Ireland would be the most drastic. Businesses will be affected by their ability to trade with Ireland, Northern Ireland’s largest international export market. Businesses are predicted to either relocate or fail. Consequentially, this would affect Northern Ireland’s economy and unemployment levels.

Gaps in law enforcement will be exploited leading to increases in smuggling and criminality. The land connection between Ireland and Northern Ireland will be utilised as a loop hole for smuggling to avoid tariffs.


There are still no adequate plans in place regarding the land border between Northern Ireland and Ireland if there were to be a no deal scenario. The uncertainty has and will continue to cause tensions and violence to rise in local communities.

 




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