Why is a Brexit No Deal a problem?

I sometimes get emailed asking me to substantiate my strong belief that, from where we are now, No Deal would be a disaster.

One way to do this is to list all the organisations who’ve contacted me to say how negatively it would affect them: all the main business organisations (CBI, IOD, FSB), the Bank of England, most sectoral groups (engineering, manufacturing, chemical, nuclear, financial, legal, logistics, haulage, aviation, pharmaceutical, aerospace etc), plus the NFU and the NHS.

Then there's the defence, cyber, police, agencies etc. The details are telling. For example a European Arrest Warrant brings a criminal back here within 10 days: outside the EAW club and with No Deal it can be 40 weeks.

Locally lots of SMEs, our FE College and our University have also flagged up their deep concerns. A neighbour, for example, who sells flowers says he would have to close within weeks.

To all of which some simply say ‘they’re scare mongering aren’t they?’

My answer is ‘not deliberately no’: though they have to make assumptions. But most importantly if I make a decision that No Deal is No Problem, because I was arrogant enough to assume that all these well informed people and organisations were ALL wrong - then I alone really would be responsible for what follows in Gloucester. 

It is easy to say ‘don’t worry it’ll all be fine’ when you have no responsibility for what happens. Those of us who are responsible cannot be so blithe about constituents’ lives, jobs and living standards.

And there is one thing more - the government’s own analysis. This has been little commented on. But it’s worth seeing what a summary of the analysis shows:

Quotes from Government no deal analysis

"...as a result of French
checks and lack of business readiness, the flow of goods through the Short
Channel Crossings (Dover and Eurotunnel) could be very significantly reduced for
months."

" HMRC has estimated that the
administrative burden on businesses from customs declarations alone, on current
(2016) UK-EU trade in goods could be around £13bn p.a."

" the UK economy would be 6.3-9% smaller in the long term in a
no deal scenario (after around 15 years) than it otherwise would have been when
compared with today’s arrangements, assuming no action is taken. There would
also be significant variation across the UK (Wales -8.1%, Scotland -8.0%, Northern
Ireland -9.1% and the North East of England -10.5%). This analysis does not
account for any short term disruptions, which would be likely to have additional
short and long run economic impacts in an immediate no deal scenario."

"the latest internal Government-wide delivery reporting reveals the scale of risk remaining in
the limited time available. In February, Departments reported being on track for just
under 85% of no deal projects but, within that, on track for just over two thirds of the
most critical projects
."

"In the absence of other action from Government, some food prices are likely to increase, and there is a risk that
consumer behaviour could exacerbate, or create, shortages in this scenario. As of
February 2019, many businesses in the food supply industry are unprepared for a
no deal scenario
."

"Industries would need to respond to the application of EU tariffs. These would vary
by sector. While for some sectors (such as life sciences or electronics) the effect of
any tariffs would be minor, other sectors would be more affected. For example, the
EU would introduce tariffs of around 70% on beef and 45% on lamb exports, and
10% on finished automotive vehicles. This would be compounded by the challenges
of even modest reductions in flow at the border. Given the unprecedented nature of
the sort of economy-wide adjustment that would be required in a no deal scenario, it
is impossible to accurately predict the ability of businesses to adapt
. The second
order effects on local economies dominated by a small number of industries, or on
businesses in the supply chains for those companies, is also hard to predict with
precision, although it would be likely to be uncertain and costly."

"In a no deal scenario there is an expectation of disruption to closely interwoven
supply chains and increasing costs that would affect the viability of many
businesses across Northern Ireland
. There is a risk that businesses in Northern
Ireland will not have sufficient time to prepare. This could result in business failure,
and/or relocation to Ireland with knock-on consequences for the Northern Ireland
economy and unemployment."

"The Single Electricity Market (SEM)
between Northern Ireland and Ireland is integrated more than any other cross-
border wholesale market. In the first instance, even in a no deal scenario, the UK
would seek to agree with Ireland a continuation of the SEM, which would minimise
impact on exit. This relies on cooperation with Ireland and the EU, which is not
within the UK’s gift to unilaterally control or mitigate."

"The service sector (which makes up around 80% of UK GDP) is supported by free
movement of people and a range of cross-cutting regulation such as mutual
recognition of qualifications. In a no deal scenario, UK businesses would be treated
as third-country service providers by the EU. The UK would risk a loss of market
access and increase in non-tariff barriers. UK businesses would face barriers to
establishment and service provisions in the EU which they had not previously faced,
including nationality requirements, mobility, recognition of qualifications and
regulatory barriers when setting up subsidiaries in EU member states."

"a) The chemicals sector is the UK’s second largest manufacturing exporter by
value, exporting £28.3bn in 2017, £17bn of which was exported to the EU. The
sector has four main clusters of operations in the North of England and
Scotland, and is an important contributor to the local economies. Supply chains
are highly integrated within the EU, and products will cross borders a number of
times before becoming final products, making them vulnerable to delays at the
border.
b) Currently, businesses who manufacture or import substances into the EU need
to register them with the central European Chemicals Agency. As of August
2018, UK businesses held over 12,000 of these registrations. Following a no
deal scenario, UK companies would only be able to sell into the EU providing
they have transferred their existing registration to an EU-based entity. The
European Chemicals Agency transfer fee for a single registration is around
£1,500, excluding admin costs. Businesses would need to meet both UK and
EU requirements when they register new chemicals or seek authorisation to sell
into both markets, creating duplication of registration fees and additional
administrative burdens. EU WTO tariffs of on average 5% would also apply.”

 

I hope every reader can now see why in my view no MP should support No Deal at the end of March 2019. It’s why I will strongly support the government Deal, with whatever amendments can be successfully negotiated, in both sides’ interests, to reassure Northern Ireland MPs and colleagues about the temporary insurance policy no-one wishes to use.

But if parliamentary colleagues from both main parties did not support that I would certainly then vote to take No Deal off the table, and the government would then have to propose a delay of Article 50.

All of which would then bring uncertainty to the Brexit process and outcome, whereas what we need is to respect the Referendum, and deliver Brexit and certainty. 

All the more reason therefore for both Conservative and Labour to support the government Deal and provide that certainty. There would be no reason in that situation for MPs in either party not to do so: both should fulfil their shared manifesto pledge to respect the Referendum.

It may not happen on March 29th but it can still happen, sensibly, and close to March 29th. We need a new agreement with the EU on a legally binding annex, revised advice from the Attorney General, DUP buy in and ERG support. It would be good for the EU and the UK. Then it needs to pass Parliament.

I remain optimistic (as Churchill said of the USA) that Parliament will do the right thing - after exhausting all other options.

 

Best regards

Richard