The authoritative source for independent research on UK-EU relations

19 Jul 2017

UK-EU Relations

The consequences of the UK failing to reach a deal with the EU will be “widespread, damaging and pervasive” a new report by The UK in a Changing Europe finds.

The ‘Cost of no deal’ report examines the consequences of the UK failing to strike either an Article 50 or a trade deal with the EU – what is termed a ‘chaotic Brexit’.

In the event of a chaotic Brexit, the UK’s nuclear plants may not be able to operate; British airlines might be unable to fly; and both UK citizens in the EU and EU citizens here would find themselves in legal limbo.

A chaotic Brexit would also have serious political and economic implications for Northern Ireland.

Potential uncertainty when it comes to monitoring and implementing rules, notably in the area of the environment, could result in weaker protections.

Legal chaos over the enforcement of contracts is merely one area of uncertainty which will prove costly and time consuming for British businesses exporting to the EU.

Complex cross-border supply chains would be disrupted, not least because requisite customs checks, tariffs and regulatory barriers will not be in place.

Drugs developed in the UK may not have their approval recognised in other member states and clinical trials would be disrupted.

Professor Anand Menon, director of The UK in a Changing Europe, said: “Our findings show a chaotic Brexit would, at least in the short term, spawn a political mess, a legal morass and an economic disaster. This report makes it clear ‘no deal’ is an outcome the British government must strive to avoid.”

The report shows that a chaotic Brexit might come about in two ways:

  • A premature Brexit: where talks break down acrimoniously with the UK unilaterally ceasing to pay its EU contributions and ending the supremacy of EU law in the UK with immediate effect
  • A timed out Brexit: where the talks do not completely break down, but no agreement is reached within the two year period and there is no extension.

The likely economic impact of no deal includes: a further significant fall in the exchange rate, a consequent rise in inflation, a fall in wages and consumer demand and a fall in business confidence, leading to a slowdown in investment.

The report shows there would be serious political ramifications if a premature Brexit occurs. The government is likely to blame Brussels and remain backers at home – creating further acrimony with the EU and bitter divisions in British politics. A mutual blame game will make future cooperation with the EU more difficult.

Professor Menon concludes: “’No deal’ doesn’t mean the country would come to a stop. But even under relatively benign conditions and with time to prepare, the impacts would be widespread, damaging and pervasive.”


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