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What A No Deal Brexit Will Actually Look Like For The UK

What A No Deal Brexit Will Actually Look Like For The UK

Boris Johnson has said no deal is now "very, very likely"

9 min read

With EU and UK leaders now warning that a no-deal Brexit is the most likely outcome when the transition period ends on 31 December, PoliticsHome has set out the biggest changes that the UK will face from the New Year.

As Brexit trade talks go down the wire, a trade deal between the UK and EU is looking increasingly out of reach.

Both sides have said they will keep negotiating until Sunday – with major stumbling blocks on state aid rules and fishing rights still to be tackled – but neither seem optimistic an agreement will be reached. Boris Johnson admitted on Friday it was now "very, very likely" there would be no deal.

While industry and opposition leaders have said the impact of a no-deal would be "catastrophic" for the UK, the Prime Minister continues to insist it will be "wonderful" for the country.

Either way, no deal will mean substantial changes to almost every part of the UK's economy and how Brits can travel.

Here's how things will change:

Trade and Tariffs

Without a deal, the UK would be forced to trade with the EU on World Trade Organisation (WTO) terms. This means the UK and the EU would impose tariffs on any imported goods, with the Confederation of British Industry (CBI) predicting this would  up to 90% of UK exports would be subjected to WTO tariffs.

Some supermarket chains, including Tesco, have claimed the impact of tariffs could see yearly food bills rising by between 4-5% and warned there may be shortages of some products, including fruit and vegetables.

Prices for goods imported into the UK from EU countries would also likely rise as a result of the British government setting up their own tariff system.

The average tariffs for 'third country' goods entering the EU currently stand at 11.1% for agricultural goods, 15.7% for animal products and 35.4% for dairy.

A no-deal scenario would also lead to so-called "non-tariff barriers" to trade, with lorries crossing into the EU facing border checks which could lead to serious delays.

The government has already built a large 6,000 capacity lorry park in Kent in anticipation of the major tailbacks that could follow from a no-deal Brexit.

Hauliers would also be required to apply for permits to take freight across the channel, but UK firms were granted fewer than 2,000 of these permits for next year, despite an average of around 10,000 trips currently being taken by UK lorries each year.

Meanwhile, HMRC has already forecast that British firms will be forced to spend an additional £15bn a year on paperwork to adapt to the new regulatory environment, including new custom declarations, licenses and labelling on some products.

Travel

Brussels has already agreed that in the event of no-deal that planes would continue to be allowed to fly between the UK and the EU for a maximum period of six months, with safety certificates issues for parts remaining valid, provided they were issued before the end of the year.

However, major airlines, including EasyJet, British Airways and Ryanair could all fall foul of EU laws which state that operating licenses to fly routes within the bloc are provided only to companies which are owned by EU, EEA and Swiss nationals.

Both sides have committed to further steps to ensure travel routes are not disrupted, but the EU have recently tied talks around airline travel to fishing rights, meaning there could be significant disruption if a deal is not struck.

France and Britain have already agreed that the Channel Tunnel would remain open for a nine month period following no-deal, but would need to come to a new legal agreement to ensure the crossing remained open beyond that period.

And those wishing to travel abroad will also have to ensure there is at least six months left on their passports and will lose access to priority EU queues at the border.

Meanwhile, the bloc has also committed to bringing in a visa-waiver permit by the end of 2022 which will cost around £6.40, allowing Brits to make multiple visits to EU countries for three years. This is similar to current arrangements for Brits travelling to the US.

Negotiations are still continuing over whether UK travellers would require International Driving Permits if they are taking short trips to the bloc, but those taking their own vehicles to the continent could also be forced to carry a physical copy of their "green card" proof of insurance documents to ensure they are covered.

Brits will also lose access to the European Health Insurance Card (EHIC) which entitles them to state-provided medical treatment if they fall ill abroad. Currently, there are around 27 million UK nationals with the cards, but in the event of a no-deal Brexit they would be required to purchase travel insurance, with higher premiums for those who have pre-existing conditions.


Medicines and research

Drug industry groups have already predicted that border checks on medicines could result in initial delays of up to six weeks, with further potential delays if the UK and EU fail to adopt a mutual agreement on standards.

Without such an agreement, manufacturers would face additional red tape by having to comply with two sets of regulations if they wished to sell their products in both markets.

In response, Health Secretary Matt Hancock ordered UK pharmaceutical firms to build up a six-month stockpile of medicines to avoid any major delays, and a special agreement has been struck to ensure there is no disruption to the delivery of the Pfizer coronavirus vaccine.

Exiting without a deal would also end the UK's involvement in the EU’s Horizon research funding programme which has provided British universities with cash and cross-border co-operation on a range of major research projects.

The EU have offered the UK continued access to the scheme at a cost of £15.2bn with further top-ups if UK researchers win grants from the programme. But Vivienne Stern, director of Universities UK International said the proposal was "not appealing" and could lead to the UK losing money if it failed to win funding grants above the £15bn figure.

Meanwhile, the future of the UK's participation in the Erasmus student exchange programme remains unclear, with ministers promising a new national programme would be created if an agreement cannot be struck.


Economy

Sterling has already dropped amid the gloomy predictions that a no-deal Brexit is now the most likely outcome, with many economists and financial groups warning the UK currency could face further dips in 2021.

According to the Office for Budget Responsibility, a no-deal exit is likely to mean an almost 2% hit for the UK’s GDP, with unemployment rising a further percentage point to 8% in 2021.

The UK financial services industry has taken steps to prepare for the event of no-deal with many firms setting up UK and EU legal offices to weather any major disruption to business.

But no-deal could still mean some firms are unable to provide financial products to EU customers from their UK bases, including trading in shares.

Meanwhile, the additional financial pressure could force central banks to cut interest rates further, despite the Bank of England already slashing rates to record lows of 0.1%.

If they drop into negative interest it could mean customers having to pay banks to look after their savings.

Business

Without an agreement, data sharing arrangements between the UK and EU would instantly come to an end. How businesses can share data, communicate with suppliers and customers is a vital component for future trade, deal or no-deal, with failure to strike an agreement impacting almost every business on both sides of the Channel.

While an agreement is yet to be reached, the EU and US have previously come to a bilateral agreement on the issue meaning there is scope for a side deal on data equivalency.

In the event that negotiations fall apart this weekend, both sides will have to ensure that urgent talks take place to ensure some system is in place by 1 January or risk major disruptions to businesses.

Mobile roaming arrangements will also come to an end without a deal, meaning mobile users will face extra charges when they travel. Some UK providers have already agreed they will continue to offer the service to their customers for part of next year, but there is still uncertainty over how long the arrangements will last.

The UK auto industry is particularly exposed to the impacts of tariffs, with cars and parts exported to the bloc subjected to an additional 10% tariff. It means the price of an average British car sold in the EU would rise by around €3000.

British fisherman would be granted full access to UK waters, with trawlers from other countries banned from entering. The same agreement would stop UK vessels from entering EU waters. But, the imposition of tariffs on UK fish exported to the bloc, which currently make up 75% of current sales, could damage the industry.

Under the current rules, exports of cod and smoked salmon would be hit respectively with tariffs of 12% and 13%.


Northern Ireland

The Northern Ireland Protocol, set up as part of the Withdrawal Agreement, will come into force in the event of deal or no-deal.

The agreement ensures the invisible land border on the island of Ireland will remain open, allowing passport-free travel, and securing the arrangements made under the Good Friday Peace agreement.

The deal will see Northern Ireland remain aligned with some EU customs and standards rules while simultaneously staying within the UK's customs territory.

Months of friction over the implementation of the agreement had led to UK ministers threatening to scrap the customs checks and trade barriers in the event of no-deal, leading to warnings that the move could put the peace process at risk.

But on Tuesday, Cabinet Office minister Michael Gove announced an agreement in principle had been struck with the EU to reduce the threat of major disruption from 1 January.

Ministers said the agreement would include giving a six-month grace period on mandatory health checks on some products going from Great Britain to Northern Ireland, while also allowing food suppliers selling to supermarkets in the region a three-month extension of current rules.

So-called trusted traders will have a three year exemption on tariffs for goods travelling from Britain, and there will be no requirement for exit or export declarations for products travelling between GB and NI for the same period.

But businesses in Northern Ireland have continued to raise concerns about the future of the relationship when the exemptions end, with some suggesting checks on goods travelling between Northern Ireland and Great Britain amounted to a new border in the Irish Sea.

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