What would the impact of a no deal Brexit mean for Britain?

Brexit UK Impact

What would the impact of a no deal Brexit mean for Britain?

Since the Brexit vote to leave the EU in June 2016, there has been much done to push through the vote in practice. While the media coverage of Brexit has minimised recently in the shadow of the COVID19 pandemic, the intricacies of the actual withdrawal are still yet to be decided between Britain and the EU. At present, talks are taking place to thrash out exactly how Britain will leave the EU by the end of 2020 – a timeline set by the withdrawal treaty already agreed and ratified by Parliament. 

However, those talks are characterised by a lack of agreement over what the future relationship between Britain and the EU will look like. The closer the deadline looms, the more likely it looks that Britain will leave the EU with no deal in place to frame how it trades with one of its biggest economic partners. Boris Johnson has set a deadline of 15th October for negotiations to come to a viable agreement. If no viable agreement is reached, he seems set to plough on ahead with no deal. 

Here, we look at what the impact of a no-deal Brexit could mean for Britain as well as what it would look like and the practical implications going forward. 

What is a No Deal Brexit in practice? 

Michel Barnier, the EU chief negotiator, has publicly proclaimed that a no deal Brexit is a hard no deal with no side deals to cushion the final exit. However, many political commentators believe that in reality member states will make their own arrangements with the UK. This comes down to the fact that individual countries now, more than ever, have to look out for themselves and their own economies. The result will be, that while a no deal Brexit may not give the hard and fast clarity that so many want after years of negotiations, the UK will still manage to leave the EU and be able to trade with many of its countries. 

In reality, both sides will need to make a series of these mini deals. While the UK’s Prime Minister seems to be playing political hardball by claiming that a no deal Brexit will not spell disaster for Britain, and will in fact be giving the UK control over its laws, rules and fishing waters, the day to day practicalities of what a no deal Brexit means for flying in and out of the country, freight deliveries and other matters like the transference of scientific knowledge are of paramount importance to figure out. 

What seems increasingly less likely is for an extension of the current transition phase. Again, Boris Johnson has emphasised that this is not an option for Britain. Going on his previous reactions to how to move Brexit talks and negotiations along, this has proved fruitful for getting his own way in the past. He managed to pass a deal through UK’s parliament relatively swiftly in comparison to his predecessor Theresa May. 

What would the impact of a no-deal Brexit mean for Britain? 

Economically speaking, a no deal Brexit has significant ramifications. If Britain leaves the EU without a deal, they will do so on WTO terms. This means that Britain will still be able to trade with the EU and be able to access its market for services and goods. However, currently, Britain is widely thought to have better terms than the WTO framework would provide. 

Given that Britain is currently in the midst of a deep recession, brought on by the COVID19 pandemic, it is particularly sensitive to any difficulties that it may encounter that hinders the growth of GDP. Plus, it cannot be overlooked that almost 50% of all Britain’s exports of goods go to the EU. Additionally, as the UK economy is so incumbent on its financial and service industry, a huge portion of its entire economy is reliant on those very exports. On the other side of the coin, it imports a similar amount from the Continent. Not negotiating a favorable deal with its most significant trading partner will undoubtedly act as a drag on its productivity. 

Furthermore, not leaving the EU with a deal has wider implications on the UK’s ability to trade elsewhere. Through the EU, it has trade deals in place for countries outside of it. The result is that trading with anyone – European country or not – is seriously hindered with no individual regulatory framework in place. A framework that the UK has enjoyed, and built a great deal of success on, since it joined the European Union. 

No Deal Brexit Consequences – Key Takeaways

With Boris Johnson announcing that he is against extending the withdrawal transition period at all between the EU and the UK, it appears far more likely than not that Britain will leave the EU with no trade deal after years of negotiations. The impact of that lack of deal will have a serious impact on Britain’s ability to trade with any countries with whom it currently trades under the EU trade laws. The result will be substantial charges and tariffs on many of its exports – just at a time when getting its economy up and running again after the lockdowns of 2020 sent GDP plummeting into the red. 

However, Boris Johnson may well have a method to his madness. The continued uncertainty that lurks with a never ending transition period is arguably just as harmful to the UK’s economy, which has been living under a cloud of uncertainty for so long now. Boris Johnson is aware that action has to be made, even if that action is not the deal he would have wanted in an ideal world. 

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