UK in a Changing Europe: No deal Brexit will be overwhelmingly negative for the UK, new academic report finds
03 September 2018
A no deal Brexit will have a potentially large impact across a wide range of sectors and regions a new report by academic think tank The UK in a Changing Europe finds.
The report, Cost of No Deal Revisited, finds a chaotic Brexit – where the UK fails to sign a withdrawal agreement – would generate short-term uncertainties including the disappearance, without replacement, of many of the rules underpinning the UK’s economic and regulatory structures.
The impacts would be felt significantly in agriculture, financial services, air transport, drugs and on EU citizens in the UK and British citizens living elsewhere in Europe.
Under a no deal outcome, mitigating measures will prove problematic. The EU is unlikely in the extreme to countenance negotiation of ‘mini deals’ to mitigate the impact of no deal as long as the key withdrawal issues remain unresolved.
Economic impact
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In the run up to no deal, preparedness spending or stockpiling by business and consumers might boost demand and be positive for GDP.
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Shortly after no deal, the economic situation becomes much more worrying. Businesses would be hit by rising input prices, resulting from the fall in sterling, and consumers would face rising inflation. Some businesses would see their supply chains disrupted or cut off.
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Although a recession is clearly possible in the short term over the long term the UK economy will continue to grow, albeit at a slower rate.
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The government’s detailed analysis of the long-term economic impact found a WTO scenario would reduce UK GDP by about 8% over the next 15 years.
At a sectoral level, manufacturing, retail and logistic sectors are most exposed. Firms and sectors heavily dependent on just-in time supply chains including almost all UK supermarkets, UK medical supplier networks and most online retail services will be severely impacted by customs and border checks. [...]
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