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Fears that the UK and the EU will not reach a trade deal were prompted by Michel Barnier on Monday when he told envoys in Brussels that he “cannot guarantee” a deal.
Although hopes have been raised for a breakthrough in fisheries, his words caused the British pound to drop and give an idea of the volatility to expect in the event that a deal is not reached.
What if there is no agreement?
The political consequences will be intense nationally and internationally. The UK economy, which is already recovering from the pandemic, will take another hit with tariffs on imports and exports introduced from January 1.
It has often been said that a no-deal Brexit would represent a policy failure and is likely to damage UK-EU relations for some time to come. The EU has said the idea that it will simply resume talks next year is “a dangerous idea.”
A Cabinet Office document leaked to The Guardian described the worst-case devastation without a deal.
“The likelihood of a systemic economic crisis has increased and will have major impacts on disposable income, unemployment, business activity, international trade and market stability, and security / capacity enhancement decisions in the context of the prosperity, “he said.
What changes would there be be to business relations?
Trade barriers will appear in the form of customs and regulatory controls, as the government has already decided that the UK is leaving the EU customs union and single market.
No deal would mean that tariffs and quotas on imports and exports would increase the prices of cars by 10% and some food products, such as cheese and meat, by 50% or more.
What about the impact on the economy?
The Office of Budget Responsibility warned last week that industries such as manufacturing, financial services and agriculture would be affected by the lack of agreement, which would eliminate 2% of the UK’s economic output in addition to the impact caused by Covid.
A Friday report from the London School of Economics Center for Economic Performance found that seven in 10 companies “expect a no-deal Brexit to negatively affect their business.”
“New data on how companies are preparing for Brexit, while facing the biggest economic shock in a century, suggests that only 59% of UK companies consider themselves at least ‘somewhat prepared’ for a Brexit no deal “, concluded.
“The consequences of not reaching an agreement are serious and the spread of the pandemic has only increased the importance of reaching an agreement,” they added.
North Ireland
The Northern Ireland protocol, which requires the region to follow EU rules on customs and standards, agrees or not. However, in a no-deal situation, the UK government has threatened not to apply the protocol and remove the barriers. This would poison relations with the Irish government and the EU due to the perceived risk to the invisible border with the Republic of Ireland.
Fishing
The UK would have control over its waters and would have the right to block access for EU fishing vessels.
However, the Cabinet Office says that in a worst-case scenario, “EU and UK fishermen could face loss of access to historic fishing grounds” with blockades at French ports, including Boulogne, where much is processed. part of British fish.
Delays of one to two days could result in a 60% loss in value of fresh crab and live / fresh scallop exports.
Food prices
An estimated 30% of the food consumed in the UK is imported from the EU, according to the Cabinet Office, and 10% comes from the Canal.
Prices would be affected by tariffs, the depreciation of the British pound and the disruption of the supply chain.
The Cabinet Office analysis suggests that prices could increase overall by 3-5% as a result of tariffs on EU imports.
“Lower income households are more exposed to increases in food prices: around a tenth of spending goes to food and non-alcoholic beverages for the average UK household; the equivalent figure is around 15% for the poorest 20%. Lower income households also tend to be less able to ‘bargain down’, probably because they are already buying cheaper products, ”the analysis says.
Tourist and business trips
Tourist visas could be imposed for travel to Europe and business trips, even to meetings in European capitals, conferences or exhibitions, would require significant paperwork and prior notification.
The Cabinet Office document had this warning: “UK citizens traveling to the EU after the end of the transition period will be treated as third country nationals (NTP). They will face additional controls at the Schengen border, causing significant delays. TCN’s visa and work permit requirements will negatively affect business mobility, as will the lack of coordination of social security in a non-negotiated outcome. “
Aviation and transportation
The EU would take unilateral measures for a limited time to allow planes to continue flying and trucks to carry goods to and from the UK. However, a serious outage could occur. In a no-deal scenario, truckers would need special permits and Transport Minister Rachel Maclean recently admitted that the UK only has a fraction of the permits needed for the 39,000 trucks involved in cross-border transport. “The UK has up to 1,668 annual and 5,040 short-term permits available by 2021,” he said.
Supply chains
The government has already warned of queues of up to 7,000 trucks in Kent should a deal be reached. The interruption of supplies would be greater in the event of no agreement.
Medicines
The government has secured over £ 80 million in ferry capacity as a no-deal contingency for the supply of medicines and other high-priority goods.
Science and Erasmus
No deal would end the UK’s participation in the £ 80bn EU flagship Horizon Europe program and educational exchange program, which strongly affects university research.
Data
A data agreement is needed to enable businesses to continue to operate online and support businesses that rely on cross-border data sharing, such as financial services, security and medical collaboration, hospitality, and transportation.
Security and vigilance
No deal would end decades of joint law enforcement, including the UK’s departure from the European arrest warrant and European programs involving exchanges of live passenger data critical to criminal and counter-terrorism operations, as well as programs sharing. Police alerts on missing persons, stolen property, DNA data and fingerprints.
