A no-deal Brexit nightmare?
As the British government ramps up contingency plans for leaving the European Union without a negotiated deal in place, prominent Brexiteer Jacob Rees-Mogg stated on Twitter that such an outcome “is not the end of the world.”
Many responded that “not the end of the world” falls somewhat short of the utopian promises made by the leave campaign during the 2016 referendum.
But with the British parliament deadlocked and the future of the deal agreed between the UK and the EU in limbo, the chances of a no-deal Brexit suddenly look a lot higher than they did a few months ago.
The truth is that very few people argue that Britain’s departure from the EU on March 29, without a deal in place, would be painless. Such a move would be unprecedented, not just for Britain but for the world, and as such the consequences are unclear.
Indeed, there is not even agreement on what “no deal” means. While the obvious interpretation is that the UK leaves the EU without any agreement in place, Brexit supporters are increasingly talking about a “managed no deal,” in which some agreements are signed even if there is no overarching withdrawal arrangement.
This subtle shift in rhetoric seems to accept that simply leaving without any agreements after March 29, 2019 would cause massive disruption to almost every aspect of British life.
The UK would suddenly no longer be a party to the legislative and regulatory framework that has governed its external trade and much of its internal economy for the past four decades, and experts said there was simply not enough time to put in place an alternative framework.
“The UK is not prepared because it is simply too big a question to be prepared for,” David Henig, a former government trade official and director of the UK Trade Policy Project, told CNN.
The UK government has just released an additional £2 billion ($2.5 billion) from the UK Treasury to help mitigate these consequences — in addition to the £4.2 billion already allocated since 2016.
It still has plans to put 3,500 troops on standby. Nonetheless, business and lobby groups still warn of disruptions at ports, dwindling medical supplies and potential food shortages. The consequences “on the whole will be negative,” according to EU law expert Steve Peers, a professor of law at the University of Essex.
Membership of the EU’s single market and customs union allows for lorries and ships to carry goods between any two points in the bloc. When imports arrive from the EU, British customs officials know that they meet required standards and have paid the right tariffs, so can be waved through.
Britain’s industries rely heavily on this — knowing there will be no delays at the border, car manufacturers or supermarkets can plan for components or foodstuffs to be delivered at the exact moment they are needed, saving the need for expensive warehouses.
If Britain leaves without a transition deal, it will default to World Trade Organization (WTO) rules. One consequence of this would be the imposition of tariffs. The lobby group, the Confederation of British Industry (CBI), estimates UK exports to the EU would face tariffs of 4.3%, hurting British businesses competing against cheaper rivals on the continent.
Backlog and border delays
More importantly, WTO rules would mean an end to the frictionless trade on which British industries depend on. Goods would have to be checked on the border, which will inevitably cause delays.
A study by Imperial College in London found that two extra minutes spent checking each vehicle, be it at the ferry port in Dover in southern England or the Eurotunnel terminal nearby, could translate to jams of up to 29 miles. “At peak times, Kent could see nearly five hours of traffic delays,” it said.
The concerns have led to the government starting work to turn the M26 motorway in Kent into a parking lot for waiting lorries.
Without frictionless trade, manufacturers and retailers would no longer be able to rely on components arriving when required. Many companies have already begun stockpiling supplies; as has the government. Health Secretary Matt Hancock said on December 17 he had become “the largest refrigerator buyer in the world” as he seeks storage for six-weeks’ worth of medicines.
Although contingencies could be put in place, said Peers. “Things can be done like fast-tracking insulin and food that goes off –that kind of thing you could hopefully do — and fast.”