Cost of No Deal Revisited

Series Title
Series Details September 2018
Publication Date September 2018
Content Type

The academic think tank The UK in a Changing Europe issued a report called Cost of No Deal Revisited in September 2018. It suggested that a no deal Brexit would have a potentially large impact across a wide range of sectors and regions.

It found that a chaotic Brexit – where the UK failed to sign a withdrawal agreement – would generate short-term uncertainties including the disappearance, without replacement, of many of the rules underpinning the UK’s economic and regulatory structures.

The impacts would be felt significantly in agriculture, financial services, air transport, drugs and on EU citizens in the UK and British citizens living elsewhere in Europe.

Under a no deal outcome, mitigating measures would prove problematic. The EU was unlikely in the extreme to countenance negotiation of ‘mini deals’ to mitigate the impact of no deal as long as the key withdrawal issues remained unresolved.

Economic impact

+ In the run up to no deal, preparedness spending or stockpiling by business and consumers might boost demand and be positive for GDP.

+ Shortly after no deal, the economic situation becomes much more worrying. Businesses would be hit by rising input prices, resulting from the fall in sterling, and consumers would face rising inflation. Some businesses would see their supply chains disrupted or cut off.

+ Although a recession is clearly possible in the short term over the long term the UK economy will continue to grow, albeit at a slower rate.

+ The government’s detailed analysis of the long-term economic impact found a WTO scenario would reduce UK GDP by about 8% over the next 15 years.

At a sectoral level, manufacturing, retail and logistic sectors were most exposed. Firms and sectors heavily dependent on just-in time supply chains including almost all UK supermarkets, UK medical supplier networks and most online retail services would be severely impacted by customs and border checks.

Further information

+ In July 2017 UK in a Changing Report had published an earlier report on the same topic.

+ In August 2018 the UK Government started publishing the first in a series of technical notices designed to prepare the UK for the possibility of a no-deal Brexit. Seventy separate 'technical notices' were due to be published in August and September 2018. The notices would include advice for businesses, citizens and public bodies. The UK Government considered that a no-deal Brexit scenario 'remains unlikely' but believed it should 'prepare for all eventualities' until the outcome of the negotiations with the EU was known.

Source Link
Related Links
ESO: In Focus: Brexit - The United Kingdom and the European Union
UK in a Changing Europe: Blog, 03.09.18: No deal Brexit will be overwhelmingly negative for the UK, new academic report finds
EurActiv, 03.09.18: ‘No deal’ Brexit would be ‘chaotic and severe’, warns expert group
The Guardian, 03.09.18: [Opinion]: Relax, everyone, a no-deal Brexit (probably) won’t happen
UK: Parliament: House of Commons: Library: Briefing Paper, No.8397 (12.10.18): What if there's no Brexit deal?

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