What Happens If There’s No Brexit Trade Deal:
The threat of “No Brexit Trade Deal” is hovering over the UK once again after the statement of Boris Johnson. On 10 Dec 2020, Johnson said, “there is a strong possibility that the UK will reach no trade deal with the EU”. There is currently free trade between the EU and UK. The free trade agreement will end on January 1, 2021. After the end of a free trade deal, both sides will withdraw from the World Trade Organization.
If the trade deal did not settle, the UK has designed its Global Tariff schedule. Both sides hinted that there are still no signs of a contract. Therefore, discussions could end with no agreement. It shows the failure of politics. Let us see what may happen if such a situation occurs.
The UK would have to impose tariffs on the EU for the goods they are exporting. Similarly, the EU would also impose taxes on the UK as third party tariffs. The UK will be faced another shock of tariffs as the country is already upset by the pandemic. As per the anticipation of the Confederation of British Industry (CBI), it would indicate that about 90% of the UK’s export to the EU would face tariffs.
That would put some industries under pressure. Prices in workshops will automatically rise as a reaction, and some of the businesses could suffer. On Friday, the London School of Economics put forward a report. According to the report, seven out of ten firms are expected to face adverse effects of no Brexit deal. The two sides have to settle a Brexit trade deal to avoid the new tariffs.
In the case of no Brexit deal, the EU will start imposing custom checks on the goods coming from the U.K. The EU will not face full customs controls even without securing a contract for the first six months due to massive delays from the U.K. Lorries will be expected to complete paperwork before entering the border.
An estimated 30% of the food consumed in the UK is produced in the EU. There would be supply chain disruptions, causing a lack of choices for food. The fresh food supply will be significantly affected. Moreover, they might look for alternatives. Nonetheless, that would increase costs due to tariffs on imports from the EU.
Medicines could face delays at borders. Although medications are not met with tariffs under the WTO rule, tariff barriers might disrupt the supply of drugs. In particular, not having a deal would hamper the transportation of medicines with short shelf life. There are negotiations to ensure the coronavirus vaccine reaches the U.K without facing any border disruption.
If both sides failed to reach a Brexit agreement for trade, no flights would occur between the UK and the EU. The UK operating license would no longer be valid in the EU. European countries could introduce tourist visas for travel to Europe. It means significant paperwork for business travel would become necessary.
What Happens If There’s no Brexit Trade Deal? The financial markets are not included in the trade discussions. So most probably, January 1, 2021, will introduce the financial sector in a no-trade deal situation despite Brussels and London’s walkout from the trade agreement.
British clearing houses have been granted permission to continue working with EU clients until 2022. EU residents who use British banks will most probably face closed bank accounts if they did not expand their workings to the member country.