Brexit remains in disarray and so the chance of a ‘no deal’ remains a very real possibility. A ‘no deal’ Brexit does what it says on the tin. It means the UK and the EU would be unable to reach a withdrawal agreement. If no agreement can be made, it means there would be no 21 months transition period. If that was the case, consumers, businesses and public bodies would have to respond immediately to changes as a result of leaving the EU. On 29 March next year, the UK would leave the EU and everything associated with that would come to an end. These are just some of the consequences:

1. Trade: The UK would revert to World Trade Organisation on trade. While Britain would no longer be bound by EU rules, it would have to face the EU’s external tariffs. The price of goods in shops for Britons could go up as businesses would have to place tariffs on goods imported from the EU. Some British-made products may be rejected by the EU as new authorization and certification might be required. Manufacturers could move their operations to the EU to avoid delays in components coming across border. The British government and the EU would agree on measures to allow the resumption of trade in things such as chemicals and pharmaceuticals, but the imposition of tariffs would be very costly. Honda estimates that tariffs would push up the cost of a UK-built car by 10 percent. And British exports would face EU tariffs. Some British Euroskeptics have argued that the government could cut tariffs on EU imports to zero. But under Word Trade Organization rules, members must grant the same “most favored nation” access to all members, so if the U.K. scrapped tariffs on EU imports, it would have to scrap them on all imports; at the same time, its exports would still face tariffs. This would have far-reaching implications for the country’s trade competitiveness; no U.K. government will opt for “unilateral free trade.”Moreover, there is no reason to believe Britain will be more successful at signing free trade agreements with non-EU countries than with the EU. In any case, Britain would need to sign agreements with most of the world to offset the impact of much diminished access to the EU market. And free trade deals would not cover services, which constitute approximately 45 percent of British exports, and would be hit hard by the loss of access to the EU market.

2. Investments: The biggest hit to British living standards would arguably come through the impact of no deal on investment. The United Kingdom would become a less attractive place to invest in traded goods, such as cars and other complex manufactured goods that require a lot of imported components. Lower wage costs—the result of a weaker pound—would not offset the increased costs of trade because labor costs now account for a low and falling share of total costs in high-end manufacturing. Weaker consumption, the result of higher inflation, would also hit investment. The result would be slower productivity growth and hence weaker growth in wages.

3. Customs: Everything coming into Britain would need to be checked at the border, but the country does not have the infrastructure to do this, let alone the facilities to store food safely while it is waiting to be checked. It will take years to either build such infrastructure at Dover or expand existing facilities at UK ports, which handle British trade with the rest of the world, all of which is subject to customs checks. The port of Dover in Kent, the nearest point in Britain to the continent, handles around 2.6 million trucks a year. Even with the necessary infrastructure, checking all these trucks would create huge delays. Without it, there would be traffic gridlock, resulting in far-reaching disruption of trade and hence to production and food supplies as well as delays for commuters and any brave British families still seeking to vacation in Europe.

4. Laws: Relevant EU laws would be transferred over so there would be no black holes in Britain’s lawbook. Britain would no longer have to adhere to the rulings of the European Court of Justice but it would be bound to the European Court of Human Rights, a non-EU body.

5. Money: The UK Government would not have to pay the annual £ 13 billion contribution to the EU budget. However, Britain would lose on some EU subsidies. The Common Agricultural Policy gives £3 billion to farmers.

6. Currency: The British pound would fall steeply, probably taking the currency below parity against the euro and to 40-year lows against the U.S. dollar, immediately pushing up inflation and reducing living standards. The Bank of England could then face a choice between raising interest rates to defend the value of the pound and head off a surge in inflation and keeping interest rates low in an attempt to shore up economic activity. It may opt for the latter, betting that the inflationary surge resulting from a weaker currency will prove short-lived. But it would at the very least face a difficult trade-off.

7. People: The UK would be free to set its own controls on immigration by EU nationals and the bloc could do the same for Britons. There could be long delays at borders if passport and customs checks are heightened. The fate of expats- there are 1.3 million Britons in EU countries and 3.7 Europeans in Britain- in terms of their rights to live and work would be unclear. Professionals working in the EU may find their qualifications are no longer recognized, meaning they are no longer able to practice. Flights to the EU could be grounded as the necessary safety confirmations to cover both ends of the journey may not be in place. Lower wage costs—the result of a weaker pound—would not offset the increased costs of trade because labor costs now account for a low and falling share of total costs in high-end manufacturing. Weaker consumption, the result of higher inflation, would also hit investment. The result would be slower productivity growth and hence weaker growth in wages.

8. Aviation: British-based airlines would no longer be allowed to fly to EU destinations because British authorization of those airlines would no longer be recognized by the EU. British airlines would probably negotiate such EU authorizations soon after Brexit, but since the United Kingdom would no longer be part of the ‘single European sky’ its airlines would not be able to fly between airports within the EU, hurting British firms such as EasyJet, which flies dozens of routes between European cities, such as Paris to Rome and Amsterdam to Lisbon.

9. Service Sector: The service sector would also be hit hard. For example, British-based financial firms would lose overnight their right to sell their services across the EU-their so-called passporting rights creating legal uncertainty over contracts. This would affect the clearing and settlement of financial trades, especially of derivatives (futures, options, and swaps), which are overwhelmingly centered in London. The Bank of England estimates that around £29 trillion (approximately $ 38 trillion) of derivatives contracts, including 90 percent of euro-denominated interest rate swaps, would be hit by a no-deal Brexit.

10. Property market: A hard Brexit could also lead to a crash in the property market, especially if the Bank of England is forced to raise interest rates sharply. If it avoids doing so and provides sufficient liquidity to the banks, housing prices would still no doubt fall as economic uncertainty deters buyers and foreign buyers shun U.K. assets until the situation stabilizes.

11. Manufacturing: The anti-EU left also believes that leaving the EU would lead to reindustrialization by allowing the U.K. government to subsidize local industries, such as shipbuilding and other manufacturing. But erecting barriers to imports does not mean manufacturing jobs come back. By disrupting supply chains and increasing the cost of producing in Britain, a no-deal Brexit threatens a further shrinkage of manufacturing.

12. The Irish Border: The Irish economy is closely linked with Britain’s, and much of Ireland’s trade with the EU passes through Britain. Moreover, no deal would lead to the imposition of a hard border between Northern Ireland and Ireland, putting into doubt the survival of the Good Friday Agreement of 1998, which ended decades of violence between Irish nationalists and Unionists loyal to London.

Outlook: No deal would constitute a profound shock to the British economy. There is no doubt it would fall into recession; the question is how deep that recession would be and how quickly the economy would rebound. There are good reasons to believe that the rebound would be slow. Brexit without a deal also promises to disrupt the balance of power within the EU, further strengthening Germany’s dominance. While this would happen whether Britain leaves with no deal or with a negotiated settlement, at least in the latter case it would be possible to keep Britain involved in some aspects of EU operations—not least those pertaining to security and defense—which would be impossible under no deal

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