Is Britain ready for a ‘no deal’ Brexit? With the two candidates for Prime Minister, Boris Johnson and Jeremy Hunt, both promising that a ‘no deal’ Brexit is better than no Brexit, the country faces the very real prospect of exciting the EU without a deal this Halloween.
The debate over the three years since the EU Referendum itself, which promised a bounty of public service spending in replacement of Britain’s EU membership fees, has been replaced with a discussion as to whether ‘no deal’ would have either a short or long term negative impact on the country’s economy and society at large.
Even before the next Conservative Prime Minister has been elected there is talk of them facing a ‘no confidence vote’ and an early General Election. The Conservative Justice Secretary David Gauke MP has said he will resign if the next prime minister chooses to pursue a no-deal Brexit and newspapers report that as many as 30 Conservative MPs are willing to vote against the Government to prevent ‘no deal’.
The leading candidate in the race to be Prime Minister, Boris Johnson, has sought to simultaneously calm the nerves around ‘no deal’ whilst doubling down on how serious he is about it. Over the weekend he explained that “we've got to show a bit more gumption about this." He added: "It's vital that our partners see that. They have to look deep into our eyes and think 'my god, these Brits actually are going to leave. And they're going to leave on those terms'."
Johnson’s motto around ‘no deal’ is a central plank in the argument that will surely see him elected. That the current October 31st deadline is ‘do or die’. Yet whilst he focuses on the potential benefit of the ‘do’ what does the ‘die’ actually look like? Is Britain about to sacrifice it’s economic health and the strength of the union itself on the altar of Brexit?
Those who support the idea of ‘no deal’ point to the empty promises of those who warned that a ‘leave’ result in the original referendum would have on the economy. Things didn’t collapse and there was no recession nor need for an emergency budget. However there was an impact and the Governor of the Bank of England, Mark Carney, explained to the Economist that the Referendum did result in a 12% fall against the Euro and prompted stimulus funding to keep the economy on an even keel.
The economy has been performing well against other European states in the period that followed, although positive spikes were ironically linked to companies stockpiling goods in fear of ‘no deal’. Today however the prolonged uncertainty as to what kind of trading relationship Britain will have with the EU has led to a current period of businesses treading water as they peer into the fog of Brexit.
One argument around the prospect of ‘no deal’ is the narrative that it would be just as bad for the EU as the UK. Yet exports to the EU make up 14% of Britain's GDP, whilst exports from the EU to Britain are only 4% of its GDP.
Larger businesses report being prepared for ‘no deal’, partly through the advice and guidance from the civil service - which has seen an estimated 16,000 of its staff working on Brexit to some degree. Yet questions remain as to what would happen to medium and smaller businesses, the backbone of the British economy. This is one of the reasons why some economists predict the cost of ‘no deal’ to the British economy to be around £90bn.
Moving to World Trade Organisation (WTO) terms are sometimes argued as a simple default that the UK will adjust to if there is ‘no deal’, however virtually no country trades solely on WTO terms and the economic turbulence is likely to be severe, especially if you consider who the wider architecture of the global trade system is struggling to accommodate, the impact of US President Trump and his propensity for starting trade wars.
Globalisation has led to a modern global economy that is complex, agile and hugely interdependent. A large economy like the UK, suddenly resetting its economic relationship with the world’s largest trade block is likely to have consequences that are hard to predict. The government has already run simulations of lorries backing up near ports and there emergency medicines being flown in, but the truth is nobody can realistically model what will happen as no country has voluntarily put themselves through it.
Further currency collapse, recession, inflation, the withdrawal of foreign direct investment at record levels are all far more likely to happen if talks between Brussels and London collapse after the new Prime Minister is chosen. The ripple effects into the global economy shouldn’t be underestimated and the world awaits this Halloween with baited breath.
Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect the views of 7Dnews.