So, as you may have seen, the @UKandEU report on a #NoDeal Brexit is out today. ukandeu.ac.uk/wp-content/upl… And whilst, obvs, most of you are already immersed in it, thought I'd attempt q quick summary for the lazy people (1)
We try to explain what No Deal means. There is a tendency to elide it with 'trading on WTO terms'. Which, of course, would be possible with a withdrawal agreement. We also make clear the crucial point that, unlike with most 'deals.' default outcome is not the status quo. (2)
We deliberately pick the worst case. Where we leave with no deal at all. Which, as we point out, we do not think is by any manner of means the most likely outcome. That being said, however, we argue that, in the event of a no deal, mitigations will be hard (3)
We distinguish between two ways of mitigating the impact. The first being unilateral actions in the UK - hiring more border staff, actions by Bank of England etc. Those, of course would happen, and in some cases are happening (4)
HMG technical reports on no deal are based on assumption EU would help us out with mitigating impacts. This we find harder to believe. 'Mini deals' in areas like air transport are, of course, possible. But why would the EU consent to sign them? Their priorities would be: (5)
citizens, Irish border, and, the Brexit bill. Surely Brussels would insist on addressing these before discussing mini deals that would dig us out of a hole? Moreover we can expect a period of mutual finger pointing and recriminations that would impede attempts at mitigation (6)
While no deal is not the most likely outcome, we can, broadly, see two ways in which it might happen. First, if the talks breakdown (perhaps over NI backstop). Second, if no parliamentary majority can be found. Here, we point to the government’s catch-22: (7)
there is little prospect of a majority in Parliament to sign what looks like a blank cheque; and yet the more specific any deal is, the more likely it is to infuriate either the ‘clean’ or the ‘soft’ Brexit’ camp (8)
We have credible estimates of econ impact of WTO terms - a reduction in output by up to 10%. Much harder to predict impact of chaotic no deal Brexit. What we can expect is: (9)
In run up, fall in pound, decreased business and consumer confidence, plus some stockpiling and contingency planning (including in some cases relocation); Govt will act to mitigate effects, via int rates and using borrowing rather than tax rises. Stockpiling may boost GDP. (10)
Declining business and consumer confidence plus disruption of trade would be obvious short term impacts, but we stress how resilient mod economies are to short term disruption: 15 months after 1995 Kobe earthquake, manufacturing output in greater Kobe was back to normal (11)
Long term, govt itself estimates that a WTO scenario would reduce UK GDP by about 8 percent over the next 15 years (that is, it would reduce cumulative growth over that period from about 25% to about 17%). (12)
Legal disruption also crucial. EU law allows decisions in one ms court to be directly enforceable in another ms. Chaotic Brexit would mean real problems enforcing contracts in other member states, which will clearly impact on trade. (13)
On trade, rules of origin paperwork alone could add 4-15% to cost of producing a good. Large queues at Dover. And OECD suggests that, on average,EU barriers to services trade with non-EU countries are four times greater than those which apply within the EU single market (14)
UK citizens in EU a particular concern. Little progress made by member states in establishing legislative and administrative mechanisms to implement provisions set out in the WA in domestic law. Brits in EU could lose right to reside, work, or access essential services (15)
A no-deal scenario would raise serious concerns about peace and stability in Northern Ireland. The outcome is likely to be a hardening of the border, involving a physical manifestation of the border in some way – such as cameras or border infrastructure. (16)
HMG ‘technical notices’ suggested businesses “should consider whether (they) will need advice from the Irish government s”. This was confirmation, in effect, that the British Government cannot make any unilateral guarantees about the economic effect of a no deal outcome. (17)
Then there are specific sectors: agriculture - About 70% of the UK’s agricultural (food, feed and drinks) imports (about 30% of total consumption) and 60% of its agri-food exports come from and go to the EU. (18)
Tariffs, border and other regulatory checks – including compliance with health, food safety, and the WTO’s rules of origin - would be reintroduced between the UK and the EU. This would slow trade and disrupt the food supply chain, at least in short term (19)
WTO tariffs would lead to a significant increase in domestic food prices. Our estimates for the meat sector and food processing show increases of 7.3% and 3.7% in retail prices, respectively (20)
A no deal scenario may look good for UK fishers. The UK could allocate more quota to UK vessels. But it might also see the imposition of tariffs on UK seafood to EU markets. UK’s biggest export market for seafood is France (21)
The shellfish sector accounts for over a third of the value of all fish landed by UK vessels. It is vulnerable to a no deal outcome as it is dependent on live exports. Delays at the UK-EU border would impact its attractiveness to European markets. (22)
Brexit will be disruptive for airlines, but failure by the UK and the EU to reach agreement would leave the industry in chaos. The failure to reach agreement would be severely disruptive. Without one, the safety certification for UK aircraft will lapse on 30 March 2019, (23)
UK airlines will lose access to EU markets, and EU airlines will no longer be able to operate services to the UK. UK passengers will no longer be protected under EU law, and customs formalities for cargo moving across borders between the UK and the EU will be necessary. (24)
Happily, there's a limit to thread length - who knew? So I'm off for a lie down. Plenty more in the report itself: ukandeu.ac.uk/wp-content/upl…
