UK Government Issues First Advice About ‘No-Deal’ Brexit Scenario

Brexit secretary Dominic Raab makes a speech outlining the government's plans for a no-deal Brexit in London on Aug. 23, 2018. (Peter Nicholls-WPA Pool/Getty Images)

LONDON—The prospect of the UK leaving the EU without a bespoke Brexit deal has spooked markets, businesses, and European governments in recent weeks, and has critics demanding that the British government step up preparations.

But the UK’s first guidance on a “no-deal” scenario, published Aug. 23, did little to allay concerns in the business community, with some sectors saying it was too little, too late, demonstrating the dangers of a no-deal Brexit.

The first 25 of 80 official “technical advice notes“ told businesses to prepare for new customs checks, revealed that pharmacists have been told to stockpile an extra six weeks’ worth of medicine, and warned that Britons living elsewhere in Europe could lose access to UK banking and pension services.

Brexit Secretary Dominic Raab emphasized that he expects the UK to be able to thrash out a deal with the EU before the scheduled exit from the 27-member trading bloc in seven months.

“I’m confident that a good deal is within our sights. That remains our top priority, that remains our overriding priority,” he said at a speech marking the release of the papers.

EU chief Brexit negotiator Michel Barnier (R) and Britain’s Brexit minister Dominic Raab (L) hold a joint press conference after their meeting at the European Commission in Brussels on July 26, 2018. (John Thys/AFP/Getty Images)

Raab admitted that, in the short term, a no-deal scenario was damaging, but insisted that in the long term, Brexit—with or without a deal–is good for the nation.

The papers, 148 pages in total, confirmed that in a no-deal scenario “the free circulation of goods between the UK and EU would cease.”

Josh Hardie, deputy director-general of business organization CBI, said a “no deal” would “wreak havoc on economies across Europe.”

“These papers show that those who claim crashing out of the EU on World Trade Organization rules is acceptable live in a world of fantasy, where facts are not allowed to challenge ideology,” Hardie said in a statement.

Increased red tape will have a serious impact on over a third of food imports, according to Helen Dickinson, chief executive at the British Retail Consortium.

“The government’s technical notices demonstrate the facts of a no-deal Brexit—reduced availability and higher prices of food and medicine, increased delays, and red tape at borders, and a VAT bombshell,” she said.

The advice papers suggest that in the event of no deal, the UK may attempt to make piecemeal micro-deals with the EU on issues such as nuclear regulation, insurance, and medicines.

The UK shares a vast regulatory framework with the EU, from workers rights, advertising regulations, to trade and customs.

Trucks queue at the entrance of the port of Dover on the south coast of England on March 19, 2018. (Daniel Leal-Olivas/AFP/Getty Images)

The advice papers point to certain areas where the EU law will be carried over to the UK automatically.

In other areas, however, markets are worried that without a deal in place, the regulatory gap won’t be plugged in time before the UK leaves the EU on March 29.

The Food and Drink Federation said the government’s decision to publish the notes was “laudible,” but said they revealed the “grisly” impact of a no-deal on the industry.

“Specifically for food, today’s notice about organic food certification makes clear that UK organic exporters may face a ban on their exports to the EU for at least nine months after a no-deal exit, while new approvals for certification are sought.”

Before the referendum, many experts on EU regulations and policy had warned that leaving the EU framework would be very complicated.

However, many Brexit hardliners dismiss the warnings over a no-deal scenario and other economic warnings as part of “project fear” cooked up by EU supporters to thwart Brexit.

The EU began to issue its own advice notes back in January, which cover the no-deal scenario.

While UK international trade secretary Liam Fox recently put the chances of a no-deal Brexit at 60-40, many analysts, including Goldman Sachs, share the government’s outlook that a deal with the EU will be struck.