What happens if Britain leaves the EU without a deal?

Brexit Secretary David Davis in front of the Brexit Select
Committee in the House of Commons © PA/PA Wire/PA Images

It wouldn't be pretty.

Over the last few weeks, a once-unimaginable scenario has been gathering momentum towards acceptability and even expectation. This scenario is that, far from leaving the European Union with a brand-new trade deal to replace the single market, a deal on customs to enable the free flow of goods, and a framework agreement to cover the vast range of our non-commercial integration, the two-year hourglass of Article 50 will simply run out against a backdrop of chaos and discord. Contrary to Foreign Secretary Boris Johnson has said, Britain will not be “perfectly OK” in such circumstances; it will be confronting a series of political disasters unparalleled in its recent history.

The crux of the turmoil will spring from our abrupt departure from the single market, which guarantees the free movement of goods and services. As we fall back onto World Trade Organisation rules, tariffs will immediately be placed on goods travelling between Britain and the EU, which amount to 10 per cent for cars and an average of 20 per cent on agricultural products (perhaps over 50 per cent on beef). Both those industries could quickly implode in the UK, with farmers also clobbered by the loss of EU subsidies.

The pharmaceutical industry will also be hurt, and financial services will lose passporting rights to sell products into the EU. In the absence of a new equivalence regime, basic cross-border contracts and transactions could be blocked or delayed. Across these sectors, thousands of jobs will be lost, and in many cases transferred to the EU. So-called non-tariff barriers will also take effect, meaning, for example, that British qualifications may no longer be recognised in the EU, and British airlines can no longer fly routes that do not involve a British airport.

Without any deals on EU citizens in Britain and UK citizens in the EU, this hard Brexit will have a human cost. With their futures in the balance, hundreds of thousands of EU workers and their families may simply decide to leave. Quite beyond the incalculable harm to Britain’s reputation, key sectors that depend on these workers—not least the NHS—could be pushed beyond breaking point. British citizens with spouses from the European Economic Area (EEA) could be forced to leave if they do not meet the income requirements that currently apply to Britons with non-EEA spouses. European students, meanwhile, will take their money and intellect elsewhere, further harming a universities and research sector excluded from EU programmes and grants.

The economic shock and investor panic will likely see a further sharp decline of sterling, which, combined with the sudden introduction of tariffs for all EU imports, will involve a soar in prices of petrol, gas and groceries. Inflation, unemployment and austerity are similarly likely to grow. Having fallen out of the EU’s trade deals with countries ranging from South Korea to South Africa, the government will moreover be scrabbling to repair dozens of trade deals, before even contemplating the much-vaunted new agreements with Australia and New Zealand.

By Jonathan Lis.

Full story at Prospective Magazine.