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What will a no-deal Brexit mean for the UK?
After six months of negotiations and a stalemate over key issues, on Friday 16 October, Boris Johnson said the UK must be prepared for a no trade deal with the EU from January, in a strong sign that negotiations with Brussels are coming to an end.
Is a no-deal Brexit really possible?
Yes. Failure to agree replacement trading arrangements will mean the UK leaving without a deal on January 1 and trading on WTO terms, which would introduce tariffs and quotas.
- The Withdrawal Agreement will still be in place, so issues like the Irish border and the so-called “divorce bill” will be settled under its terms, but many other issues remain unresolved.
- In other words, the original “no deal” may not be possible, but what is now known as “no deal” might better be viewed as a “no trade deal” exit.
What would no deal look like?
The European Union is adamant that there is no such thing as a “managed” no deal – fearful that making a no deal look too comfortable risks turning it into a self-fulfilling prophecy.
- That will not prevent the European Commission from making contingency plans to smooth out significant disruption but only on a temporary, unilateral basis and only if it is in the EU’s interest.
- Whether or not there is a trade deal, UK financial services will only be granted access to the EU market on the basis of “equivalence”, which is the same system of regulatory recognition US firms have.
How would Trade & Customs be managed?
Without any formal trade deal, the UK would have to rely on WTO rules – in a model described by Brexiteers as an “Australia-style” relationship.
- The default commission position is “all relevant” EU legislation will apply to imports and exports, including tariffs, which will mean customs checks.
If a point is reached when no deal becomes inevitable, then the interests of both sides would become equally aligned in avoiding a catastrophic outcome.
- Even with temporary measures in place, the fundamental question of what future relationship Britain and the EU want will remain.
- No deal is not sustainable for the long term and eventually the two sides will need to return to the negotiating table.
Sources: the Hindu.