In Depth

Pros and cons of a no-deal Brexit

There’s still time to avoid crashing out - but should we?

A no-deal Brexit is looking ever more likely in the wake of Boris Johnson’s decision to suspend Parliament for much of the run-up to the Brexit deadline.

The prime minister has made it clear that he will take the UK out of the EU on 31 October even if he cannot secure an agreement with Brussels. He told government employees earlier this month that “preparing urgently and rapidly for the possibility of an exit without a deal will be my top priority”.

But there is significant opposition in Westminster to the idea of a no-deal Brexit, with Jeremy Corbyn vowing to do “everything necessary” to prevent such a scenario, says the BBC.

If the Labour leader can get enough votes to pass a no-confidence motion against Johnson, he could further extend Article 50 to delay no-deal, and call a general election, says The Guardian.

But if a vote of no-confidence were to prompt an election, there is no guarantee that a majority of returning MPs would be against no deal.

So what should happen? Here are the potential pros and cons of a no-deal Brexit on a variety of issues:

Con: trade logistics set to suffer

The UK would revert to World Trade Organisation (WTO) rules on trade if no withdrawal deal is agreed before the country quits the bloc at the end of October, the current deadline agreed with the EU.

This means UK exports to the eurozone would face the same customs checks and tariffs as other non-member states. Analysts agree that the overnight end of frictionless zero-tariff trade would be likely to lead to shortages and price increases for a number of goods, and cause significant delays on both sides of the Channel.

Leaked research carried out by Whitehall’s Brexit Department suggests that without a deal, the Government expects a return of a hard border with Ireland; three months of chaos at ports that could affect food, medicine and fuel supplies; delays at airports; a confrontation between UK and EU fishermen; protests across the UK; rising costs of social care; and severe delays at the border between Gibraltar and Spain.

And “some British-made products may be rejected by the EU as new authorisation and certification might be required”, says the i news site, which warns that manufacturers may move their operations to the Continent in order to avoid delivery delays.

Pro: EU cannot impose new rules

Supporters of Brexit have cited the WTO’s Trade Facilitation Agreement (TFA), which came into force in 2017, arguing that it obliges the EU to treat the UK fairly.

Leading Brexiteer Jacob Rees-Mogg has accused former-chancellor Philip Hammond of failing “to acknowledge” that any changes by the EU to standards or border controls that effect the UK negatively “would be illegal under WTO anti-discrimination rules”.

This has long been a Brexiteer talking point. Speaking to the Debating Europe website in 2017, former Tory MP Peter Lilley insisted that in the event of a no-deal Brexit, “we’ll trade with the European Union on what’s called Most Favoured Nation terms, which means the same tariffs and no more than apply to America, Japan, and China, all of whom trade extremely successfully with Europe”.

However, the BBC argues that such claims do not “stand up to scrutiny”. Although the TFA prevents the EU from discriminating against the UK, it “does not mean the UK can expect to be treated in the same way that it is now”, says the broadcaster.

“The UK would be treated like any other third country - and in the absence of any trade agreement, that means tariffs and border checks,” the broadcaster adds.

Con: violates Good Friday Agreement

The Guardian suggests that the commitment by the British government to uphold the Good Friday Agreement “limits the kind of economic model the UK can pursue to just those models that are compatible with having an open land border with the EU on the island of Ireland”.

Indeed, both the UK and Ireland maintain that a hard border must not return to Northern Ireland, even in the event of a no-deal Brexit. But if the UK were to leave without an agreement in place, the Republic would come under huge pressure from Brussels to exert EU customs and immigration controls.

In April, Irish leader Leo Varadkar said the Republic and the EU would do everything possible to avoid the emergence of a hard border, but added that avoiding a violation of the peace-keeping deal in the wake of a no-deal would be “difficult”.

Experts have warned that a perceived violation of the spirit of the Good Friday Agreement - which does not explicitly mention border arrangements - could trigger a resurgence of the sectarian violence that blighted Northern Ireland for decades.

In a letter to Donald Tusk earlier this month, Boris Johnson repeated his demand that the EU scrap the Irish backstop, and claimed his government was committed to honouring the Good Friday Agreement.

The PM tweeted the letter, adding: “I have written to [Tusk] about key aspects of the UK’s approach to Brexit, problems with the backstop & the Government’s commitment to the Belfast (Good Friday) Agreement whether there is a deal with the EU or not.”

Pro: technology may save the Irish peace deal

Johnson has repeatedly insisted that the withdrawal agreement - which includes the controversial Irish backstop provision - was dead “as it stands”. Speaking at a Tory leadership hustings in Belfast before becoming PM, he said that technology was the only way to avoid a return to a hard border in Ireland while enabling the UK to fully quit the EU.

The Daily Telegraph notes that the EU is open to “alternative arrangements” on the border, as long as they “maintain the integrity of the EU single market” and fulfil the British government’s commitment to avoid a “hard border” and “any physical infrastructure or related checks and controls”.

During a press conference with Angela Merkel on 21 August, Johnson suggested that the UK had 30 days to come up with a viable alternative to the backstop, picking up on a seemingly throwaway comment by the German chancellor.

Merkel had said: “If one is able to solve this conundrum, if one finds this solution, we said we would probably find it in the next two years to come but we can also maybe find it in the next 30 days to come.”

But how an alternative could be achieved in practice is unclear. The EU’s deputy chief negotiator, Sabine Weyand, has already ruled out all existing technology as insufficiently advanced.

The BBC says that “one potential, but expensive, way of avoiding physical checks” at the Irish border could be to develop a satellite system.

Lars Karlsson, a former Swedish customs officer, told the broadcaster: “The driver could have a phone in their pocket, linked to a satellite. And when the truck passes the border, a computer would automatically register it.”

However, this still wouldn’t eliminate the need for checks at the Irish border, according to Karlsson. He notes that despite a significant amount of technology on the border between Sweden, which is in the EU, and Norway, which is not, customs checks take around 20 minutes per lorry.

Con: economic growth may stagnate...

The Office for Budget Responsibility (OBR) has estimated that economic growth would fall by 2% by the end of 2020 if the UK left the bloc without an agreement, and that this would push up public sector borrowing by £30bn.

“Together, these [would] push the economy into recession, with asset prices and the pound falling sharply,” an OBR report warns.

According to other experts, even this gloomy outlook is a best-case scenario. The Bank of England and the Treasury have both published separate forecasts that indicate that the economic downturn would be far more damaging than the OBR suggests.

Then-chancellor Hammond claimed in early July that a “disruptive” no-deal Brexit could cost £90bn, telling the Commons: “That will also have to be factored in to future spending and tax decisions.”

Pro: ... or it could accelerate

In a fairly unconvincing game of connect-the-dots, Leave supporter Rees-Mogg suggested that Hammond’s forecast for the UK economy in the event of a no-deal Brexit was “based on less than half a page of argument” in a report by the Treasury.

The former chancellor’s figures are based on the assumption that “all sorts of new product standards will face our exporters and importers, despite over 20 years of shared rules and standards”, said Rees-Mogg in a Telegraph article. This worst-case scenario would “lead to new compliance costs so high they would depress GDP by a staggering 4.2%, accounting for around half of the £90bn negative impact cited by Mr Hammond”, he continued.

Rees-Mogg insisted that the idea that there would be “essentially no positive contribution... to the UK’s economy from agreeing free-trade deals with non-EU countries” is “silly”, and pointed to an earlier claim by the Treasury that a UK Free Trade Agreement with the EU alone could give the UK economy a 3% boost.

The MP also highlighted a World Trade Model developed by Cardiff University that suggests deals with non-EU countries could yield a 4% boost in GDP. “The total positive impact of no-deal could be in the region of about £80bn,” he wrote.

Rees-Mogg's claims about the potential economic benefits of a no-deal withdrawal echo those of former Brexit secretary David Davis, who has said that even a steep drop in the value of the pound could be advantageous.“The pound’s always been too high from the point of view of industry because of the effect of the City. So our competitive position with vis-a-vis Europe would be dramatically better even if there are tariffs,” Davis told parliamentary magazine The House.


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