A “no deal” Brexit needn’t be disastrous

A former Chair of Vote Leave says both sides could manage the consequences sensibly

July 26, 2018
New Brexit Secretary Dominic Raab with Chief EU Negotiator Michel Barnier. Photo: Monasse Thierry/ANDBZ/ABACA/ABACA/PA Images
New Brexit Secretary Dominic Raab with Chief EU Negotiator Michel Barnier. Photo: Monasse Thierry/ANDBZ/ABACA/ABACA/PA Images

While most people are despondent about Brexit, there may be grounds for believing that all will not end in tears. The government’s Chequers deal is certainly the worst of all worlds for the UK, but there is still a possibility that there will be an eventual outcome which works much better than this for both the UK and the European Union.

There is no doubt that the Chequers plan is a very poor deal but, given developments over the last month, it seems probable that the House of Commons will vote it or some variation of it through in the autumn. The government will probably sell it to the public as a “temporary solution,” assuring us that a better deal will be struck in due course. We have reached this position because most members of the House of Commons and the Lords want us to stay in the customs union and single market—while maintaining the illusion this deal respects the referendum result.

But it is still possible that this deal will not go through. Votes over the last few weeks have been on a razor’s edge. It is not clear the prime minister has placated the pro-Brexit European Research Group (ERG) and many Remain-leaning Conservatives are also unhappy. Add to this the fact that a member of the government-supporting DUP, Ian Paisley, has now been suspended from parliament, and the margins start to look very thin indeed. It is perfectly possible that the deal gets voted down, and we run out of time to get any alternative agreement in place before 29th March 2019.

What would happen then? We would have to fall back on World Trade Organisation (WTO) trading terms. Given adequate preparation time, this should have been a good option—indeed arguably the best available. We could have negotiated arrangements along the lines achieved by Canada and more recently Japan, and continued trading freely with Europe. The problem now is that we are running short on time, making WTO terms look increasingly tricky.

If we do have to fall back on "No Deal" WTO terms how likely is that to problematic? A huge amount depends on how sensible everyone is. If intransigence prevails, disruption could be severe. There could be heavy congestion at the ports. Supply chains might be severely interrupted. There could be mutual recognition problems affecting everything from aviation to food supplies.

Probably, however, ways will be found to make these problems manageable. Life will therefore continue much as before. Most people will not be greatly affected and the economy—only about 12 per cent of which comes from exports to the EU27—will continue to grow slowly, as it has since the 2016 referendum. There will not be Armageddon.

There is also a possibility, however, if one is allowed to take an optimistic view, that this “No Deal” outcome could turn out to be much better than many people think. If the UK leaves the EU and falls back on WTO terms, it would feasibly force us back around the table after 29th March 2019 to strike a free-trade deal as two independent blocs without the political baggage. It obviously would make sense for the EU27 to have a free-trade deal with their largest customer, the UK. If this could be tied in with the UK working closely with the EU27—on an inter-governmental basis rather than as part of their political project—on areas of mutual common interest, there is no reason why the advantages to everyone of this kind of co-operation could not be maintained.

Once things settled down, therefore, this could then lead to the relationship between the UK and the EU27 which most Leavers hoped the referendum would produce, while avoiding the downsides which Remainers feared. Like Canada and Japan, we would have free trade with the EU27 while remaining outside the single market, the customs union, the common agricultural policy and the common fisheries policy. We would be in charge of our money, our borders and our laws, and free to trade with whomever we like. We could then co-operate with the EU27 on all the many policy areas where this makes sense—from security to climate change, from higher education to research and development.

Sometimes it is possible to turn what look like insuperable difficulties into big opportunities. Maybe even at this late stage, by accident rather than design, we will find our way through the current impasse to the stable and productive relationship with our continental friends, which both we and they need.