No-deal Brexit: how likely is it and what would be the impact?

Since Boris Johnson took over as PM the chances of crashing out on 31 October have risen

No-deal Brexit, crashing out, or a departure on WTO terms – call it what you will, it seems increasingly possible the UK could experience this on 31 October. How could it end up happening? And what would it mean?

How might no deal happen?

No deal is the default – without a withdrawal agreement in place it takes place automatically on 31 October. A new deal seems increasingly unlikely given that Boris Johnson and his ministers have demanded terms – scrapping the Irish backstop and an entirely new withdrawal deal – that have been repeatedly rejected by Brussels and would be hugely ambitious anyway given the 93-day deadline.

Could it be stopped?

It seems a majority of MPs still oppose a no-deal departure, as they did in March. It nonetheless remains unknown if the Commons can block Johnson if he is intent on such a Brexit, whether or not proroguing parliament is possible. MPs would need to create the circumstances for a binding vote and it is unclear how this might be done. It is worth noting here that some in Westminster see a government intent on no deal being blocked by parliament as Johnson’s preferred scenario – allowing him to call an election as the self-styled champion of Brexit.Quick guide

What does ‘no deal’ actually mean?

It would simply mean that at 11pm UK time on 31 October the UK would, by default, become a “third country” in terms of relations with the EU, with no post-Brexit plan in place, and no transition period. This would drop the UK out of countless arrangements, pacts and treaties, covering everything from tariffs to the movement of people, foodstuffs, other goods and data, to numerous specific deals on things such as aviation, and policing and security. Without an overall withdrawal agreement each element would need to be agreed. In the immediate aftermath, without a deal the UK would trade with the EU on the default terms of the World Trade Organization (WTO), including tariffs on agricultural goods.

What impact would there be?

To a great extent this is a leap in the dark, given the multiplicity of factors involved, but a number of sectors are deeply worried. With meat farming, there would be an immediate WTO 40% tariff on exports to the EU, which could instantly wipe out many farming businesses. Other UK firms that export to the EU would need to apply for customs, excise and VAT procedures, or they could not ship goods. Delays due to border checks, which many business groups warn could soon become very long, would have knock-on effects for firms reliant on a constant stream of supplies. For individuals, there are concerns about supplies of medicines, and the potential that travellers to the EU might need to go through extra checks. Essentially, for both businesses and individuals, the potential list of impact is very long and cannot be completely predicted.

What mitigation measures are in place?

The government began preparing for possible no deal ahead of the original Brexit deadline in March, passing legislation to cover areas such as nuclear material, money laundering and road haulage, and moving thousands of civil servants to make no-deal plans. While some warn that the government is still less prepared for an October no deal, planning has been stepped up under Johnson, with Michael Gove handed a cross-government cabinet role to lead on this, complete with a select cabinet sub-committee. Sajid Javid, the chancellor, has promised extra funds in the event of no deal and could put together an autumn budget intended to rejuvenate the economy. The government is also reportedly spending up to £100m on an advertising campaign to let businesses and people know how to prepare for a no-deal Brexit.

A sign displays the price of coal in sterling and euros at a petrol station in Northern Ireland
 A sign displays the price of coal in sterling and euros at a petrol station in Northern Ireland. Photograph: Paul McErlane/The Guardian

What would it mean for the Irish border?

It would involve checks of some form, whatever the UK government’s insistence that it will not impose any infrastructure. As the Irish government has pointed out repeatedly, Ireland cannot remain a part of the EU’s single market and allow the unmonitored flow of goods across what will then become a customs, standards and regulation border. While there is an understandable desire to avoid infrastructure on the frontier – which has so many crossing points it is virtually impossible to completely police anyway – some new system of checks would come into place.

How would it affect other government plans ?

This is a question which the Johnson government has, as yet, not answered, particularly in the context of the many tax cuts and spending plans so far unveiled. Much of this has been based on the idea of using some or all of the £26bn or so of “fiscal headroom” – extra borrowing that would be permitted within current limits – to pay for this. However, Treasury forecasts say this money would evaporate in the economic hit of no deal. On the campaign trail Johnson said the government could instead use the £39bn divorce settlement with the EU. However, this is not a credible plan, as the sum covers a series of already-agreed UK commitments paid over a number of years. Some of the money could not be clawed back, and to renege on other payments would severely damage the UK’s financial credibility.

Would it mean Brexit is finally over?

No. One of the biggest appeals about a no-deal Brexit for voters who support it is the idea of “getting it over with”, absorbing whatever chaos takes place and moving on to other priorities. But this is a fantasy. The UK could not trade perpetually on WTO terms and would need to make a permanent trade deal with the EU – involving just the same issues as before, such as a divorce payment, and arrangements for the Irish border. The main difference is that this would all need to happen as quickly as possible, without the buffer of a transition period running to the end of 2020.

References:
https://www.theguardian.com/politics/2019/jul/30/no-deal-brexit-how-likely-is-it-what-would-be-impact

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