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ConservativeHome took an early interest in a No Deal Brexit – we have long believed it is a strong possibility – running a five-part series on it over two years ago, and then another almost exactly a year later.

But we have been hesitant in pronouncing on it ourselves.  The range and depth of the issues; the obscurity of whether law would win out over politics in the event of No Deal taking place; what that politics would be, especially on the EU side; the division of responsibility there between local authorities, national governments and the EU institutions themselves; the contestability of information that appears in the media from the UK side; the shortage of its counterpart from the EU one; and, above all, the tendency of all concerned to believe what they want to believe – all this and much more makes reading what would happen in the event of a No Deal Brexit riddlingly hard.

None the less, we believe that it is possible to trace the outline of what might take place, and that it is worth trying to do so, especially in the light of recent leaks about the state of play in UK.

  • One must begin with the fact that No Deal really would mean what it says: in other words, leaving the EU without any agreement at all.  To describe this as trading with its members on WTO terms is accurate but incomplete.  Doing business with another country or group of countries on such terms takes many forms – usually, including side-agreements.  This type would have none.  It would be, so to speak, a minimum WTO arrangement, at least at the start.
  • It is therefore a misnomer to speak of a “managed No Deal” – unless the EU signs up to a Malthouse Compromise or Clean Managed Brexit-type plan.  What the EU has announced to date is a unilateral preparedness programme.  It would be inaccurate to describe this as a series of mini-deals.
  • It also follows that the arrangements on the UK side can only be half the story.  How the EU handles its own half, including the tariff and non-tariff checks on goods from the UK that would follow from us becoming a third country, will be crucial.  In this respect, attention has been focused on the channel ports, especially Dover and Calais.
  • The optimistic view is that the national governments in question, and certainly the ports themselves, have no interest in running any more than minimal checks – and are likely to run down even these in the event of bottlenecks and queues.  This view is pushed energetically and consistently by the Calais authorities.
  • The pessimistic take is that the EU itself – with France, Germany and the Commission in the driving seat – will see No Deal through the lens of politics, not economics.  In this event, it will not be receiving £39 billion from the UK.  And it will require a hard border in Ireland in order to police its internal market.
  • The EU and the national governments will therefore attempt, according to this reading, to maximise tariff and non-tariff checks at the ports (and elsewhere).  Hence the long run of stories, including yesterday’s Sunday Times Operation Yellowhammer details, about queues in Kent – and shortages of fresh food, medicines, fuel, etc.
  • An under-written aspect of the No Deal story is the readiness, or lack of it, on the EU side of the channel.  An organisation no less critical of the Government than the CBI has said that “contrary to some claims, the EU is behind the UK in its plans to prevent the worst effects”.
  • None the less, the possibility of maximum rather than minimal checks on the EU side raises questions about the preparedness or otherwise on the UK side.  Perhaps the best way of estimating this is to follow what Ministers themselves have been saying – or try to, given the element of repetition and confusion in reporting.
  • In April, Chris Heaton-Harris, who had just resigned as a DexEU Minister, suggested that Britain was ready for No Deal: plans for it, he insisted, were “very well advanced”. He went on to criticise what he called “end of the world is nigh” stories – which were concentrated upon claims of maximum checks on the EU side, as above.
  • In June, however, Michael Gove, setting out his stall for the Conservative leadership, implied that we were not ready – calling the October 31 deadline for leaving “arbitrary” and saying that he was “not wedded to it”.  He added that a No Deal Brexit could lead to a general election and a government led by Jeremy Corbyn.
  • Since Boris Johnson became Prime Minister, there have been a mass of No Deal preparation announcements, including the following: 500 new border force officials; buying livestock; ramping up HMRC; increasing local authority preparedness; redeploying civil servants; improving lorry paperwork.
  • Put all this together, and questions arise.  Whose assessment of the UK’s preparedness was better – Heaton-Harris’s, or Gove’s?  If the latter was on the money in June, how much has really changed in scarcely more than two months?  If readiness was so well advanced under May, why the welter of new announcements under Johnson?
  • Part of the answer, according to Downing Street and other sources, is that Philip Hammond did the minimum he was obliged to do, by way of No Deal preparation, because he never believed in it as an option – even though he was formally signed up to it, as he was to all other Government policy.
  • Another element seems to be that, whatever may be the case with the Government’s preparations, it is the private sector’s that perhaps should be of most concern.  Some businesses appear to have convinced themselves that a No Deal Brexit will not be allowed to happen; others, particularly smaller ones, may not be across the possibility at all.
  • Gove insists that the Yellowhammer document, with its gloomy assessment of public and private sector readiness for No Deal, is out of date – along with other similar leaks.  The Sunday Times insists that it is very recent.  The Government should clear the matter up by publishing its own up-to-date assessment forthwith.
  • This should also cover the mass of No Deal-related issues other than possible delays at the channel ports and their consequences – such as law enforcement data and information-sharing; financial services; fishing; data; energy supplies; UK citizens in the EU: i.e – the subjects referred to in the Yellowhammer report, and more.
  • There would evidently be no immediate economic upside to No Deal – though Open Europe thinks that the eventual downside “could be reduced to an average reduction in growth of -0.04% a year if the government deploys maximum mitigation measures in the form of unilateral trade liberalisation”.  We make three points in closing.
  • First, the balance of the argument suggests that the EU, noting that the Johnson Government has a small majority and believing, not necessarily correctly, that No Deal will damage the UK more than the EU itself, would seek to apply checks as rigorously as possible – in the expectation that the UK would return to the negotiating table.
  • Second, we are tending to see one side of the story.  It is not in the interest of the Government to disclose all the mitigation measures it has put in place to prepare for No Deal.  The picture we are being painted of a lack of preparedness may therefore be exaggerated.
  • Third, potential damage from No Deal could be offset by a dramatic programme of tax cuts and structual reform.  But it must be asked whether the present Parliament would agree to this – and what the likelihood is of a government with such a programme winning a sustainable majority at a general election.
  • All in all, the verdict of Roberto Azevedo, the Director-General of the WTO, is surely worth heeding.  His view? “It’s not going to be the end of the world but it’s not going to be a walk in the park either. It is going to be a bumpy road.” He said this in the context of our original point above – that there are different sorts of WTO terms.

To those who claim that there is no mandate for a No Deal Brexit, our response is simple.  A referendum was held on whether or not to leave the EU.  The British people voted for Brexit.  Not for a Deal Brexit or a No Deal Brexit: but, very simply, for leaving itself.

Brexit should therefore take place as soon as possible, no general election having obviated the referendum verdict – and immense damage having been done to the Conservative Party, and to the country itself, by delay.

Lord Ashcroft’s massive post-referendum poll found that the main reason why the British people voted to Leave was because of “the principle that decisions about the UK should be taken in the UK”.  That rationale is political, rather than economic.

In the event of the very worst No Deal forecasts coming true, we will find out how attached voters are to that take.  Or even if smaller-scale disruption takes place.

369 comments for: A No Deal Brexit. “It’s not going to be the end of the world. But it’s not going to be a walk in the park either.”

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