Brexit is happening now but the UK hasn’t really assessed the impact of a “no-deal” divorce

Theresa May European Council 09:03:2017

From left to right: Mr Donald TUSK, President of the European Council; Ms Theresa MAY, UK Prime Minister. Shoot location: Bruxelles – BELGIUM Shoot date: 09/03/2017 Copyright: European Union

The last few days, amid the political storm that the Dutch elections have generated, the Brexit question has seen important events as well. Last week the Queen has given her assent to the Brexit bill, and have formally cleared the way for Prime Minister Theresa May to start talks to leave the European Union. PM May has announced yesterday that she will trigger Article 50 next Wednesday, March 29, and so she will officially notify the EU that the UK is leaving.

But despite the historic importance of those moves, the UK’s political class is still weighing the impact of leaving the EU without a deal with Brussels. And while someone says that would be “perfectly ok”, other parties involved believe that a “no-deal” scenario would certainly lead to chaos.

Royal Assent and formal notification

On March 16, Queen Elizabeth gave Royal Assent yesterday to the government’s Notification of Withdrawal Bill, allowing British Prime Minister Theresa May to trigger Article 50 of the EU’s Lisbon Treaty, which will kick-off the process of leaving the European Union. House of Commons speaker John Bercow announced the news to MPs, and PM May’s May’s spokesman told a briefing: “We look forward to beginning negotiations when we trigger Article 50 by the end of this month”.

Indeed PM May has formally announced yesterday that she will trigger Article 50 on Wednesday, March 29, starting official Brexit negotiations between the UK and the European Union. David Davis, the Secretary of state for exiting the EU, said yesterday: “Last June, the people of the UK made the historic decision to leave the EU. Next Wednesday, the government will deliver on that decision and formally start the process by triggering Article 50”.

Post-Brexit deal

Britain’s future relationship with the EU is not depending only on Article 50 though. A deal to avoid trade tariffs with the EU after Brexit is indeed the hottest point of discussion in Westminster at the moment, although British politicians still seem to be quite far from having a common point view. On March 15, Brexit Secretary Davis made a clear point and openly said the UK government has not yet made a thorough assessment of the economic impact of leaving the EU without a deal.

Mr. Davis also said that an assessment of the impact a no-deal situation had been anyhow carried out during the referendum campaign, but he added that he thinks that “one of the issues that’s arisen is that those forecasts don’t appear to have exactly been very robust since then”.

Incoming tariffs

According to the Financial Times, Mr. Davis made clear that leaving without a deal would involve the imposition of tariffs for trade with EU states by the World Trade Organisation (WTO) for British businesses, something that many see as a major threat to the UK’s economic system. Speaking before MPs on the Commons Brexit committee on Wednesday, Mr. Davis admitted that not reaching a Brexit deal would leave carmakers facing 10 per cent tariffs, while dairy and meat producers would be hit with tariffs of between 30 and 40 per cent on exports to the EU, the Financial Times reported. Brexit Secretary Davis has anyway said that providing forecasts of the repercussions of a no-deal scenario was “impossible” without knowing what mitigation measures could also be put in place.

Alarming Report

The House of Lords’ EU External Affairs Sub-Committee seems to be slightly more concrete at the moment though. According to new report from the House of Lords that circulated last week, a deal to avoid trade tariffs with the EU after Brexit will be “imperative” as the UK seeks to safeguard its long-term future. Sky News reported last week than the Lords report said: “The UK’s long-term prosperity after Brexit relies on safeguarding UK-EU trade in goods”. “It is critical that the Government seeks to minimise disruption caused by tariff and non-tariff barriers”, the peers also warned in the report.

The EU’s point

The European Union clearly shares the same opinion. Mr. Davis’s comments indeed came just hours after Donald Tusk, the president of the European Council, said that Britain leaving the EU without a trade agreement would be more damaging for the UK than for the rest of Europe. President tusk indeed rejected suggestions that the EU would be worse off than the UK in a no-deal scenario, and said the EU will “not be intimidated” by threats about the UK leaving without a deal. “I want to be clear that a ‘no deal scenario’ would be bad for everyone, but above all for the UK, because it would leave a number of issues unresolved”, Mr. Tusk declared.

“Perfectly OK”

On the contrary, there’s also who believes that leaving without a post-Brexit deal wouldn’t be too damaging for Britain. Boris Johnson, Foreign Secretary and former Mayor of London, said last week that Britain will be “perfectly OK” without a deal on Brexit. Mr. Johnson formally dismissed any “apocalyptic” consequence of such a case and said Britain’s “robust economy” would facilitate to have trade deals with other economic powers to compensate. “I don’t think that the consequences of no deal are by any means as apocalyptic as some people like to pretend”, he reportedly said. UK’s Prime Minister Theresa May, for her part, has said “no deal is better than a bad deal”.

According to latest sources, the EU seems still determined to delay any official discussion on a post-Brexit deal until the UK will agree on an exit bill. Reports by the European Commission estimate that Britain could face an exit check of around 60 billion euros. The European Union is Britain’s largest trading partner with almost £357 billion ($431 bn) of goods flowing between the two economies each year. According to the UK’s Office for National Statistics, the EU in 2014 accounted for 44.6% of UK exports of goods and services, and 53.2% of UK imports of goods and services.

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