The authoritative source for independent research on UK-EU relations

29 Aug 2018

Politics and Society

Relationship with the EU

Dominic Raab argued on Thursday morning that “no-deal planning needs to become more engaged with the public”. This engagement has begun in earnest with the release of 24 all-singing, all-dancing “technical notices” on what will happen if the Brexit talks break down.

The language is opaque, but some of the headlines – on access to your pensions, on access to medicines, and on how much it will cost to use your credit card – are about the impact on bread and butter issues, which we often take for granted. Oh, and there’s some information on what will happen to our food, too.

Much of what the Brexit Secretary said remained wrapped in conjecture, contingencies, mitigations, and maybes. After all, what the government can do in the event of a no deal is inherently limited. It can promise to limit the cost of a no deal – but there was no pretence, not even from Raab, that this would be anything other than an exercise in short-term damage limitation.

It can promise to replicate EU regulation through the recognition of EU tests on medical devices, or on GM crops. However, it cannot promise that EU bodies will respond with flexibility in kind.

The government can also speculate how the EU might react. There were familiar lines from Raab about the EU not cutting off its nose to spite its face. However, because we don’t know what the political atmosphere would be in the event of a no deal – though, given a no deal would be preceded by the breakdown of negotiations, we can hazard a guess – then no one can really be sure what the working relationship will be like.

There is one key problem for the UK we can nearly certain about. In the event of no deal, the economic disadvantages would be felt more deeply by the UK than the EU. The government’s confirmation that World Trade Organisation tariffs would apply on day one, though not really news, is crucial to this.

The level of what economists call “risk exposure” of no deal is 12.2 per cent of UK GDP. For the EU as a whole, it is 2.64 per cent. The government has said that, as a result, “businesses should consider the impact on their role in supply chains with EU partners”. Which is one way of putting it.

This imbalance is not just about economics, but about legal uncertainty. It can be seen (and felt) in the problems caused just by the act of leaving without a deal. If there is no deal, the UK will suddenly depart from a whole range of EU bodies and regulations that provide certainty for businesses. What this means is the tearing up of EU “red tape”. Followed by individuals, businesses and the government desperately piecing it all back together again.

For individuals this means, for example, VAT charges if you import something under £135 from the EU. Such a cost would be passed on to consumers. Businesses will experience this through customs declarations, and these technical papers implore businesses to hire customs experts and acquire warehouse space. For the government, this involves funding for the hiring of 9,000 new civil servants, and 1,000 more border staff.

What these papers also set out is that, in lots of unforeseen areas, no deal would create a regulatory black hole. The UK will not have time to form new, bilateral relationships with EU bodies. This means a lot of the headlines are about areas where there will be time-limited, short-term impacts. These will, in the long run, be resolved. But this short-term impact would be real.

Take the example of food. The UK can say that it would accept organic food from the EU. It can hope that the trade embargo on our organic food would be quickly lifted in kind. It can ask the European Commission to speed up a process of certification that normally takes around nine months. But it will have to hope. And this will be a matter of minimising the period when organic food exporters will be banned from selling to our largest export market for food products.

What the government can do is promise to spend money. In a sense, that is the easy bit. This will help to underwrite guarantees for EU projects in areas from agriculture subsidies, to funding Erasmus, to underwriting nuclear research. After all, as Raab noted: “People’s livelihoods are at stake.” But, these papers make it clear, not everyone’s livelihood can be protected from the impact of a no-deal Brexit.

This is just the first tranche of these no-deal Brexit papers, and there are more to come. And whether these contingencies will come in to force remains unknown. A range of senior politicians here and in the EU27, and the top academic experts on Brexit, put the chances of no deal at something like 50:50. Raab said this was about talking to the public on the potential risks. In truth, it was about persuading people – mainly in his party – that this is a political risk not worth taking.

Alan Wager is a research associate at the UK in Changing Europe. This piece originally featured in the New Statesman.


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