How a No Deal Brexit could affect the UK economy
by Rosie Mccaffrey
A no deal Brexit is the increasingly likely prospect of the UK leaving the EU without new trade, customs or regulatory agreements. This would mean that, in terms of trade, the UK would rely on World Trade Organisation regulations. Some say this would be catastrophic, referring to it as a ‘nosedive’ out of the EU. Whereas hard-line Brexiteers tend to think of it as a very valid option, Theresa May has even been quoted saying ‘no deal is better than a bad deal’.
A deal would aim to remain in a customs union with EU countries that allowed trading without the tariffs that the WTO would impose. But in the event of no deal tariffs on different goods would range from 1.5% to 10% making British products less worthwhile to Europe, who can still trade with other EU countries tariff-free. As a country we use many imported goods; cars, for example, will face a particularly high tariff of 10% under WTO rules. This means that in no deal scenario good trade deals with non-EU countries would be essential to future prosperity, but these deals have not yet been secured.
The ‘special relationship’ sought by Theresa May to trade with the US, is less of a sure thing than it appeared when May was the first political leader to visit Trump after his election, and the pair told press their trade relationship would be very strong. But this does not mean that Trump will make trade affordable for the UK, only that he wants the UK to trade more; pay American tariffs and buy American products. Trump tends to operate on high tariffs, and under the WTO no country can operate under different tariffs for the same goods from the same country. Meaning that Trump and May’s ‘special relationship’ is nothing more than humouring from Trump and a front from Theresa May, not an attractive trade deal.
Trump and May’s ‘special relationship’ is nothing more than humouring from Trump and a front from Theresa May, not an attractive trade deal.
While a no deal Brexit would waive the £40 billion separation cost and would bring in new tax revenue in the form of tariffs, it would also create what economists predict will be something between an economic dip, and a full-blown recession. On top of that, the income from tariffs relies on good trade deals with other countries, and if these cannot be secured, then a fall in exports will only make the blow to the economy harder.
And a Brexit deal, or lack thereof, is about more than money. The British Medical Association have said that the uncertainty following a no deal Brexit will harm efforts to ‘coordinate pandemic preparedness’. As an EU member the UK is part of the ‘European Centre for Disease Prevention and Control’, but remaining part of the Centre would only happen if a deal is struck. A stable supply of medicines such as vaccines and the chemical components required for x-rays are yet to be secured, with the government admitting they are stockpiling medicines. Such organisations that allow coordination in areas such as health care cannot exist without some sort of deal. So yet again, the result of a no deal Brexit is uncertainty in areas such as healthcare where uncertainty is unacceptable.
In the fallout of a no deal Brexit, it is important to keep in mind who is affected by a deflated economy, because it is not the politicians who got us here. Sir John Major predicts that the poorest will be hit hardest in a no deal Brexit, and even believes the situation is so desperate that a second referendum is called for, despite it clearly having downsides at this late stage in the Brexit process. He is not alone in this view; in a recession, the poorest are the ones who struggle to feed their families whereas the creators of such economic states are never at risk of falling below the breadline.
While Brexiteers tended to aim their campaigns at the working classes, any Brexit is likely to expand the already growing wealth gap, but a no deal Brexit has so many unknowns that the UK will certainly lose business and wealth in the initial months and years after March 2019. The cost of living will rise, infrastructures such as the NHS will face instability and be less able to function, and struggling businesses will shrink the job market and economy.
