Expert View

Drop the ‘no deal’ delusion

by David Hannay | 19.06.2017

David Hannay is a member of the House of Lords and former UK ambassador to the EU and UN.

As talks finally get under way in Brussels over the terms of Britain’s divorce from the European Union, one extremely smelly red herring needs to be discarded right at the outset. Whoever it was in No.10 or in the Department for Exiting the EU who invented the silly slogan “No deal is better than a bad deal” is either ignorant or a bluffer, or both. And it is unwise to try to bluff when the other party to the negotiation knows you are bluffing, and that you will do more damage to yourself than to them if you walk away without a deal.

So, to aid in such red-herring destruction, here are 12 reasons why no deal would be the worst possible outcome. There are probably plenty more.

1. Individual rights

If there is “no deal”, both the roughly 1 million Brits in other member states and the more than 3 million EU citizens here will lose their automatic rights under the EU’s Residence Directive and their protection against discrimination on, for example, health care and employment. And automatic rights of free movement to study, work or retire across the EU would go too.

2. Trade in goods

British exports to the EU (44% of the total) would become subject to the EU’s Common External Tariff rates which while modest in many cases are substantial in others (see below). Our imports from the EU would be subject to similar charges, raising prices to consumers and inflation. Trade would be subject to non-tariff barriers and customs controls to verify origin and accordance with phyto-sanitary rules. Currently 14,000 trucks enter and leave the UK without such controls every day.

3. Trade in services

This accounts for 80% of UK economic activity, with a large surplus on that trade with the EU. World Trade Organisation rules would be of little help in this sector. Mutual recognition of professional qualifications under EU law would disappear.

4. Financial Services

Financial services would feel particularly strong effects. The loss of “passporting” for banks and insurance companies in the UK (£40 billion of the UK’s £200 billion in financial services revenues comes from EU business). Regulatory equivalence would not be there as an (anyway inadequate) replacement.

5. Automotive industry

There would immediately be 10% duties on cars in both directions, with corresponding damage to supply chains.

6. Pharmaceuticals, chemicals and nuclear industries

There would be severe problems as all these industries are currently regulated at EU level (more than 30 EU regulatory agencies would need to be replaced overnight by national ones – but exports to the EU would still need to meet EU regulatory requirements). 60% of UK exports in pharmaceuticals and chemicals go to the EU.

7. Agriculture and food

In this sector, 70% of our trade is with the EU. Some EU tariffs on foodstuffs are very substantial (25% on confectionery, 35.5% on dairy products, 87% on frozen beef). There would be major supply-chain problems here too, particularly between the two parts of Ireland.

8. Civil aviation

Loss of the European Common Aviation Area regulatory framework (which also covers flying between Europe and the US). Loss of rights for budget airlines to fly between EU destinations. Immediate travel disruption and more expensive holiday flights.

9. Security and Justice

Loss of membership of Europol and Eurojust (the agencies for law enforcement and judicial co-operation). Loss of access to the Schengen Information Service and other EU databases, including those covering DNA. Loss of rapid extradition in both directions under the European Arrest Warrant.

10. Budget payments

This would at last produce a saving, but probably an illusory one as the EU would pursue the UK through international courts ensuring that our mutual relationship would not calm down quickly after a no deal exit.

11. Foreign and security policy

Major loss of influence in an area of EU policy which is likely to become more significant and which will adversely affect British influence worldwide. Any “deal” outcome would be likely to seek to preserve as much of this influence and co-ordination as possible.

12. Reputation

The UK has hitherto stood by its treaty obligations and worked for a rules-based international order. The reputational damage from leaving the EU without an Article 50 agreement would be considerable.

That is quite a list, you might think. It is surely up to those who, like the foreign secretary, say that leaving without a deal would be “Perfectly OK” to debate the issues set out here; and, if they cannot gainsay them, to drop that silly slogan. Of course it is not possible at this stage to guarantee that Britain will not leave in March 2019 without a deal. But we do need to recognise that, if we do so, March 29, 2019 would be a Black Friday for the British economy.

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    Edited by Bill Emmott

    4 Responses to “Drop the ‘no deal’ delusion”

    • Surely by now someone has worked how totally rubbish the leaving Europe is since we want/need most of what E U has to offer! We will lose all advantage at far greater cost, and gain absolutely nothing, but hot air! This damage will last for years, far into the distant future!….. U K. is fast becoming a laughing stock..how can we all be so stupidly negative!!!

    • Davis has is a self-confessed liar and he has a reputation for not being a particularly bright spark. Can’t he get it into his thick skull that there can be no deal we can make with the EU that is better and more sensible than being a full member?

      He and his fellow xenophobic bigots have landed the country into an appalling mess and have also turned the whole nation into a laughing sock. The lunatics have definitely taken over the asylum and Davis is the living proof.

    • I agree with all of this but how is it possible for MP’s in parliament, of whatever party,to be so blind to the implications of Brexit? For those INFACTS readers who are not already convinced of this mad policy, I would invite them to go to the Federal Trust website and read, in particular, the speech by John Bruton, a former PM of Ireland, at a recent conference in London. After reading what he has to say one can only conclude that what the UK government is apparently trying to do is quite simply insane, there is no other word to describe it.
      Again how is it possible that the views of such a person as John Bruton are not given more general distribution? And so far no real debate has taken place on the issues that Brexit raises as will be apparent to anyone reading John Bruton’s speech.

    • I agree with all the above. Unfortunately, so do virtually all subscribers to INFACTS. Is there no way of shouting all these self-evident truths from the rooftops ? Equally unfortunately, the newspapers with the highest circulation and the most readers who voted for Brexit in the first place, are all rabidly right-wing (virtually fascist) xenophobic rags owned by millionaires who have no interest in seeing the UK prosper. These magnates don’t even live in the UK and I question the wisdom of allowing high-circulation daily papers to be owned by individuals (or corporations owned by individuals). Far too many people with little or no knowledge of the EU and politics in general, allowed their opinions to be formed by the press and/or the mendacious liars who used the referendum to further their own careers. We need to fight back, with equally lurid headlines, via the Independent, Guardian and Mirror. But will it happen ?