The voices in support for 'no deal Brexit' are slowly getting stronger. But what would a no-deal Brexit mean for Britain, what happens next and how can it possibly affect India?
The countdown for Britain’s withdrawal from the European Union (EU) – popularly known as Brexit – has already started. With with less than 80 days to go for one of Britain’s most decisive events in the Post-war era, Brexit would sever political and economic ties between the UK and the EU and restore full border controls between the two entities.
However, despite the urgency in the matter, the country, led by Prime Minister Theresa May, appears to be in a state of chaos and confusion when it comes to how it wants to proceed with its withdrawal from the 27-member trade bloc.
On June 23, 2016, 52 per cent of British voters voted in favour of the proposal to leave the EU. The then British Prime Minister David Cameron immediately announced that he would step down. His successor, Theresa May, pushed ahead with Brexit, but in November 2016, Britain’s High Court ruled that the government needed parliamentary approval to trigger Article 50 (which outlined the provisions under which a country could leave the EU) of the Lisbon Treaty (the international agreement that amended and simplified the governance of the European Union).
After May triggered Article 50 of the Lisbon Treaty on March 27, 2017, the deadline for Brexit was set on March 29, 2019. It was expected that by 29 March 2019, the EU and the UK will finalise a deal that would set terms for UK’s exit from the trade bloc.
Accordingly, UK Parliament approved May’s 'hard Brexit' on 13 March 2017. On March 29 UK's PM May submitted a letter to EU president Donald Tusk, thus officially triggering Article 50 to begin the two-year period of exit negotiations.
What is the most recent development?
Following months of hardball negotiations, May managed to broker a deal with the EU which was finally put to vote in the Parliament on January 11 this year. However, Prime Minister May suffered a crushing defeat after the British MPs, including many from her own Conservative Party, voted against the deal by a landslide majority of 230 votes.
Nonetheless, May was able to survive a vote of no-confidence – which was tabled immediately after her Brexit deal was rejected. The Prime Minister submitted a Plan B to the Parliament by Monday (January 21) and vowed to renegotiate a more “acceptable” deal with the EU.
In the event of the UK failing to agree upon a deal with the EU, Britain is likely to “crash out” of the trade bloc with “no deal”, an outcome vehemently opposed to by a majority of the 'Remainers' (who voted for Britain to remain in the EU in the 2016 referendum). The Opposition leader Jeremy Corbyn (of the Labour Party), has even told PM May that he would not participate in her cross-party dialogues for Brexit if she doesn’t guarantee that no-deal is “off the table.” The PM, however, has been reluctant to do so, reportedly fearing that such a step may alienate the Brexit hardliners. Theresa May survives no-confidence vote, but the UK still stands on a precipice -- and time is running out
The debate on ‘no-deal Brexit’ is turning out to be as divisive as the row over Brexit. So, what does ‘no-deal’ actually entail?
What's the deal with 'no deal?'
A no-deal Brexit means just that – all the EU rules and regulations would cease to apply after 29 March 2019, if the two (UK and the EU) do not agree upon a deal. Essentially, if the EU and UK finalise a deal – known as Withdrawal Agreement – the two would enter a transition period after March 2019, which would last till December 2020, which will allow businesses, consumers and organisations more to time to adapt and respond to changes, post Brexit.
However, with the no-deal Brexit, there would be no transition period.
"No deal would create massive uncertainty owing to the disappearance of many of the rules underpinning the UK’s economic and regulatory structure. This is why people worry about whether even an aircraft will be able to take off from UK to a EU country and vice versa. The rules governing flights between EU countries are EU rules, and they will cease to apply the moment we drop out with no deal. Short-term measures will almost certainly avoid the worst possible outcomes – but they will be a sticking plaster," Professor Jonathan Portes, senior fellow of The UK in a Changing Europe, a UK-based think tank, and co-author of Cost of No Deal reports, told timesnownews.com.
What happens if there’s no deal Brexit
With no EU rules and regulations to govern UK’s trade and economy, Britain would revert to the rules of the World Trade Organisation (WTO) for the trade. “A ‘no-deal’ Brexit would apply the WTO tariffs framework, by default, where their goods would attract 10% tariffs,” Sushant Gupta, CEO of SG Analytics, a data-centric 'research and analytics' company with presence in UK, USA, Switzerland, and India, told timesnownews.com. With UK goods facing EU’s external tariffs, the prices of the goods will also increase in British shops.
Reports suggested that as per leaked research from the UK's own Brexit department, parts of Britain may run out of medicine and food supplies within 15 days of the present agreements falling through in case of no deal.
The rights of three million EU citizens in the UK and over one million Britons living in the EU would be in a “limbo” and won’t be protected. With UK and EU free to determine their own immigration rules, passport and customs checks could intensify at the border, leading to longer delays.
Flight services may get disrupted with flights to EU getting grounded as mandatory safety permits would have to be finalised first. Drivers from the UK would require a special permit to drive their vehicles in EU. Roaming charges on UK phone numbers in EU countries would be applicable post ‘no-deal Brexit’. British Prime Minister Theresa May turns to Brexit 'Plan B'
The case for ‘no-deal’
While a majority of Britain’s political class, as well as the EU, is of the opinion that a ‘no-deal Brexit’ scenario should be avoided, a few of the ‘hardliners’ of the Brexit movement have voiced support for ‘no-deal’. British MP, Jacob Rees-Mogg, one of the 'arch Brexiteers' recently said that he believed that a "no-deal scenario would not be a disastrous outcome for Britain."
In fact, Liz Bilney, CEO of Leave.EU, an organisation dedicated to spreading awareness about the Leave campaign, said in a statement on the company's website, that a no-deal should "be seen as a positive." She claimed, "It is at worst, benign, at best, a fabulous opportunity for a fairer, more prosperous Britain." As per a BBC report, a few of the senior Leave leaders also believe that no deal “would be perfectly acceptable as long as sufficient preparations have been made”
In the case of no-deal, Britain would not have to pay £39 billion divorce bill to the EU. "We could also in principle withhold the “financial settlement” or divorce bill part of the deal – although this would poison relations with the EU in a way which might spiral out of control," Professor Portes said.
Significantly, during the transition period, Britain could strike deal with other non-EU countries but they would only be implemented after December 2020. But with no deal and no transition period, Britain could implement the deals as soon as both parties agree upon the terms of negotiations. However, it is to be noted here that trade deals can take many months, and even years, to be finalised.
No love for ‘no-deal’
Most political and economic experts believe that a no-deal could prove to be “disastrous” for Britain and is not an ideal solution. Former attorney general Dominic Grieve, a Conservative Remainer leader, told Sky News that a no-deal Brexit would be "absolutely catastrophic" for the UK. "We'll be in a state of emergency," he said.
The British economy is expected to take a massive hit because of no-deal. “ The country’s central bank, Bank of England, has warned that with no-deal, the economy could collapse by 8%, unemployment will shoot up to about 7.5% from 4.1%, housing prices to crash by 30%, and inflation to bounce to 6.5%, forcing the BoE to raise interest rates rapidly, further choking the economy,” Gupta, of SG Analytics, told timesnownews.com.
According to Gupta, a no-deal could significantly impact UK's financial and auto sectors, which are key drivers of the UK economy. He added, "Some of the financial giants are already shifting their operations to Paris and Frankfurt to avoid losing their ‘passporting rights’ – the provisions that allow the UK firms to sell financial services to European countries without having to set up a branch. The auto sector is reeling under pressure as well, as the strong supply chain link of the UK with the EU remains vulnerable among others."
What it will mean for India?
Conventionally, UK has been a “gateway” of sorts for Indian companies to gain access to the EU. Indian firms, with ties in UK and EU, may face the heat if UK walks out of EU with no deal, resulting in their “access” getting snapped off.
“Many Indian firms which have their operations in the UK and currently benefit from EU’s single market would be impacted the most in the short-term, post the hard Brexit,” Gupta said. The sectors most likely to be affected are the automobile, IT and pharma in India.
Additionally, Professor Portes expressed his apprehension about UK's ability to quickly strike trade deals and other economic relations with other non-EU countries, immediately after no-deal. He said, "In the immediate aftermath of No Deal, it is very questionable whether the UK would actually have the administrative or political capacity to devote to this. Certainly, while Brexit-supporting UK politicians have talked a lot about the priority they attach to trade relations with India, there hasn’t been much actual action – and immediately after a No Deal Brexit I wouldn’t expect anything to happen soon."
However, in the long-run, India could perhaps benefit with Britain out of the EU, as the UK would be at liberty to sign trade agreements independently. “A ‘no-deal’ could be more beneficial than a ‘deal’ Brexit because of limited involvement of several EU members to negotiate and develop a new trade relation. The UK and India may create a new free trade agreement and could push for more trade concessions from the WTO to boost bilateral trade relationship. However, it may take longer to get the policy changed and implemented,” said Gupta.
A no-deal Brexit may sound like a ‘default option’ for Britain but it may very well open a Pandora’s Box for a country which is already dealing with turmoil. Perhaps for the UK, the greatest riddle remains at this time, ‘To deal or not to deal, that’s the question.’
If only Shakespeare had an answer for that.
