UK economy could miss out on 9% growth under no-deal Brexit

Report issued by the British government on preparations for exit from EU show widespread lack of planning

BELLEEK, NORTHERN IRELAND - FEBRUARY 14: A Border Communities Against Brexit sign can be seen on the Irish border on February 14, 2019 in Belleek, Northern Ireland. Britain will leave the European Union on March 29 following the referendum in 2016. Many people in Northern Ireland and Ireland are concerned about a return of a so-called hard border, which could inspire unrest reminiscent of the Troubles. (Photo by Charles McQuillan/Getty Images)
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The UK economy could end up 9% smaller than it would have been otherwise in the event of a no deal exit from the European Union, according to the latest update on plans for the possibility that the country leaves the trading bloc without a deal in place.

In a devastating document that was only released because of pressure from the former Conservative MP Anna Soubry, now a member of The Independence Group, the full scale of Britain’s unpreparedness for no deal is laid bare.

The report notes that “despite communications from the Government, there is little evidence that businesses are preparing in earnest for a no deal scenario, and evidence indicates that readiness of small and medium-sized enterprises in particular is low.”

It found that only 40,000 businesses had applied for an Economic Operator Registration and Identification (EORI) number, without which they would not be able to export their goods to the EU. The government estimates that there are 240,000 EU-only trading businesses, meaning only a sixth have prepared for the worst.

Individual citizens are also not prepared for the effects of crashing out without a deal. A survey by the Department for Exiting the EU showed that 55% of Britons were not expecting to be affected by a no deal scenario. However they will need to apply for car insurance green cards and International Driving Permits to drive in the EU.

They will also be treated as third country nationals by EU States, and will be outside of the Schengen arrangement that allows for unfettered crossing of borders within the countries party to that deal. This means their passports will not be accepted at e-gates, and waits at passport control when travelling in the EU will be much longer than it currently is.

Analysis of the effects of no deal on various regions of the UK are chilling. Wales and Scotland are expected to see their economies lose out on 8% growth, with Northern Ireland missing out on 9% and the North East of England in excess of a tenth.

When the UK leaves the EU, it will leave the Single Market and the Customs Union, and, in the absence of a trade agreement, the EU will treat the UK as a third country for trade in goods. On exit, this could affect the availability of goods in a number of ways, including customs administration and delays at the border. In the absence of an alternative agreement,

Companies will even feel the effects of no deal in the use of data, which in the event of a no deal exit would see “a gap in the lawful free flow of personal data while the assessment takes place.” Businesses are considered to be “at varied levels of readiness and the Government is engaging widely to increase awareness of actions that businesses can take.”

Key industries such as the manufacture of chemicals will be disrupted by the need to register with the European Chemicals Agency if they want to continue trading with their current EU customers. Registration will cost £1,500, and there are likely to be more than 12,000 of these needed.

The issue of Northern Ireland remains fraught, for no deal would see no backstop to maintain a frictionless border. The report warns that “there is an expectation of disruption to closely interwoven supply chains and increasing costs that would affect the viability of many businesses.”

It cautions that disruption to cross-border security on crime and security, and the potential “for community tensions to be heightened” could see criminal and terror groups “seek to exploit gaps in law enforcement and any divergence between Northern Ireland and Ireland, which may lead to increases in smuggling and associated criminality.”