What everyone has missed about a no-deal Brexit

Leavers and Remainers make the same mistake of talking as though it is a coherent outcome

May 14, 2019
Photo: Isabel Infantes/EMPICS Entertainment
Photo: Isabel Infantes/EMPICS Entertainment

What would a no-deal Brexit look like? Three years since the referendum this issue has been debated more than perhaps any other. The European elections on 23rd May will revive the question. And yet all sides seem to have reached the wrong answer.

Prominent Leavers of course downplay the potential damage. Nigel Farage’s Brexit Party insists there is nothing frightening about us quickly adopting WTO terms. Nigel Lawson meanwhile told me recently “I think this is the only acceptable outcome, and it is in a sense the default position because we are committed to leaving.” Remainers take the rather different—though more plausible—view that it would be catastrophic.

But the truth is that both sides have missed something. For both camps, a no deal Brexit is talked about as though it is a coherent outcome. For good or ill it is a destination where Britain might end up.

This is a fundamental misunderstanding, because in fact there is no such thing as a long-term no-deal. It is not really an end point at all, but instead the start of a humiliating process. What's likely to happen is that after storming out of talks, we will begin to row back, and in the end will accept something very similar to the withdrawal agreement that was on offer in the first place. The Brexit debate rarely takes this into account. But it is key if we are to assess Britain’s options in the months ahead.

So what happens if we crash out? Not what you might think.

The immediate consequence is indeed that we fall back on the infamous "WTO terms." Championed by Leavers, for most economic forecasters (including the government’s) the damage would be immense. Severing links with our largest trading partner would throw the economic system into disarray. Cross-border trade flows would grind to a halt. Sensible Brexiteers concede that it would at the very least be disruptive.

But it would also be unsustainable. And that word is key. For the truth is that the situation could not—and would not—continue. It would not be allowed to.

The reality is that businesses need to trade and goods need to travel. A major economy like Britain needs an overarching deal with its largest trading partner. Forty-five per cent of our exports go to the continent. A government might threaten “no-deal” but no administration could sit on its hands while the system really imploded. The human and electoral consequences would be too great.

We would be looking at a dramatic U-turn. How would it work? In the days after a no-deal departure, the machinery of Westminster would be in convulsions. The government would look on appalled as any remaining reputation for economic competence disintegrates. The newspaper front pages of empty shelves and chaos at Dover will herald doom at the ballot box. The Tory Party and the political class as a whole will start to get very worried indeed.

And that is when self-preservation will kick in. The chaotic reality is precisely what will force MPs to leap to the rescue. They will form groups—cross-party if necessary—and legislate at lightning speed. Within days—weeks, at the most—Britain will be back at the negotiating table.

What happens then? The Chief EU Negotiator Michel Barnier has made clear the price for any orderly agreement is acceptance of the withdrawal deal and the controversial Northern Ireland backstop. This time Westminster will be in no position to refuse.

And what if a new prime minister takes over, promising to implement no-deal on a more permanent basis? No Tory figure could command sufficient support. You would need a majority in parliament that our current sorry crop can only dream of.

This is the reality of no-deal. It is not an end-state but the start of a process. That process will be one of capitulation.

The lesson is that of basic negotiating dynamics: the bigger partner dictates the terms. The only question is how long it takes us to get there—and how many humiliations we experience along the way.