A ‘no deal’ Brexit would lead to severe disruption, pose a fundamental risk to key sectors of the UK’s economy and put many jobs at risk a committee of MPs has warned.
Published today (19th July 2019) the latest report from the cross-party House of commons Brexit committee warns that a no deal-Brexit could have damaging consequences for almost every area of the UK economy.
The publication of the report – based on evidence taken from representatives from a number of different sectors of the UK economy – follows the latest forecast from the independent Office for Budget Responsibility that a no-deal Brexit could cause a £30bn hit to the public finances and push the UK economy into recession.
Presumed Prime Minister in waiting Boris Johnson has pledged to deliver Brexit “do or die”.
“A no deal Brexit … would be at best a foolhardy gamble and at worst, lead to severe disruption, and it is neither desirable nor sustainable as an end state for our economic relations with the EU,” said the Committee’s Chair, Hilary Benn MP.
“We heard from representatives of important sectors of the UK economy which are all great British success stories. Every single one warned us of the damaging consequences faced by their members in the event of a no-deal Brexit.
Outlining the messages from these sectors Benn said: “The UK’s position as the front-runner destination for venture capital investment in technology firms would be jeopardised. The UK’s car industry would be put at a competitive disadvantage because it would face tariffs on its exports to the EU and interruptions to its highly integrated supply chains. ‘No deal’ would lead to problems with some food supplies and, we were told, would be ‘disastrous’ for UK farming. The sudden introduction of tariffs on the pharmaceuticals and chemicals industries would seriously challenge the viability of their supply chains. The UK’s higher education sector – a world leader in science and research – would experience a short-term shock and longer-term reputational damage from which it would struggle to recover. And UK services businesses would risk loss of market access and face uncertainty about how no deal would affect their staff working in the EU because they would be treated as third country providers by the EU.
The report also dismisses Johnson’s repeated claim that an obscure WTO regulation will ensure smooth trading in the event of no deal. “Without a deal the UK could not rely on Article XXIV of the GATT to maintain current tariff-free trade arrangements with the EU. If the UK were to leave the EU without a deal, the European Commission has said the UK will become a third country without any transitional arrangements.”
The findings of the report have been welcomed and reiterated by many in industry. Food and Drink Federation COO Tim Rycroft, who gave evidence to the committee, said: “A no-deal exit from the EU would be disastrous for the UK’s food and drink industry, as we said in our evidence to the Committee.
“Our industry employs 450,000 people and has a turnover of £104bn. Analysis released earlier this week by the UK Trade Policy Observatory found that no-deal would destroy £18.5bn of UK food and drink manufacturing,
Rycroft added that no deal will have grave consequences for UK consumers. “Within weeks it is likely that shoppers would notice significant and adverse changes to the products available and random, selective shortages. Limited shelf life products would face the most immediate risk….UK food imports will climb from autumn onwards as fresh food stocks decline, so any ‘no deal’ disruption will have a major impact on availability.”
Commenting on today’s Brexit Committee report Stephen Phipson, CEO of Make UK said: “No deal would leave manufacturing in dire straits: facing tariffs on the import of goods, just in time delivery logistics would become inoperable, business would be unable to access the people to ensure British companies can fill vacancies where they have skills gaps or send workers to the EU for service contracts and other commercial opportunities.
“Also in jeopardy would be the commitment to maintain mutually recognised, close regulatory alignment with the EU, supported by a system of arbitration and standard setting to ensure that British firms can produce goods that can easily be traded across Europe with clear protections in place.
“Some major companies have already voted with their feet and switched their planned business operations away from the UK. This is only going to get worse the longer the uncertainty prevails, and once these jobs and the opportunities they bring are away from UK shores, they will never return.”
Meanwhile, Mike Hawes, chief executive of auto industry trade body SMMT said: “We have always been clear about the devastating consequences of ‘no deal’, and as the report says, planning for such an outcome has already ‘had a chilling effect on investment in the sector’..‘No deal’ must be avoided at all costs or risk irreversible damage to this vital sector.”
In a separate development, 47 per cent of firms believe the impact of Brexit is a greater threat to growth than cost pressures (45 per cent), political uncertainty (44 per cent) or weak growth in the UK economy (43 per cent).
These are just some of the findings from Lloyds Bank Commercial Banking’s Business in Britain report which surveyed 200 of the country’s largest manufacturers with a turnover of £50m or more. The report found that almost four in five (79 per cent) forecast their turnover will increase over the next five years, and by an average of 12 per cent.
Among exporters – 93 per cent of those businesses surveyed – 55 per cent said demand from overseas buyers was growing, while 16 per cent said it was declining.
Even amid Brexit uncertainty, a third (33 per cent) of manufacturers said the EU would remain their most important growth market for the next five years, followed by China (15 per cent) and North America (13 per cent).
I hope the remainers all remember the way the EU is treating Switzerland in its negotiations with the EU. Only 13 % of the Swiss want to join the EU but one size fits all so they are now being threatened with withdraw of electricity supply contracts and a number of financial limitations etc. They have never belonged and never wanted to. But have the great misfortune of being piggy in the middle, we on the other hand are an offshore Island with no tainted land border with that lot. The only problem we has was a certain Mr Heath who sold out fisheries and industry down the pan to join what is a German Power base
I think you’ll find we most certainly do have a land border with ‘that lot’.
Once the EU believe that no deal is not a possibility then all we will get/got is a bad deal or not leave .We are worth about £9B/annum to the EU
Remain and have a say (even if only small) in what goes on the wider world, or leave and stew in the mess of or own making, just so a handful of people can gain more from one or two other nations! Whatever we do is dependant on relations and compromises with other nations, whether in or out the EU. At least in the Eu we all follow the same basic outlines. Consider BoJo’s latest pronouncement, which is factually on a par with loads-a-money for the NHS, on kippers! And he is probably going to be the next PM, what hope have we all? BoJo and Trump, what a pair!
Yet more Project Scare?? The SMMT and Make UK are organisations controlled by PLCs, not the 2.2m UK SMEs that are thriving during the current, largely unreported (Never on this site), huge UK export ‘explosion’. Before the Brexit vote HM Treasury predicted ‘an immediate 500,000 job loss’ if we voted to leave. We did – and the economy has boomed ever since! When the UK joined the EU in 1974 the countries ‘left behind’ – South Africa, Australia, Canada and NZ – have since enjoyed record growth rates.. A lesson for the UK, no doubt..
Sorry Benn, but Project Fear does not work any more. £30 Billion is a Big Scary Number, but it is only £500 per head.
Bring me my chequebook! It is worth double that to avoid becoming an ‘Arkansas’ to the ‘United States of Europe’ …… [ apologies to Arkansas …..].
BTW, For those who can’t see it, Benn’s political ideology just does not work. Venezuela is the latest in a long list of places where it has been tried, and try as they might, it always ends in people having to eat their pets. £500 is a small price to pay to save all those ToTos
The way forward is difficult to predict especially with project fear from both sides. I remember life before the EU it made absolutely no difference when we joined. The big difference to our country happened when we changed our economy from manufacturing to monetarism. We now have far fewer people employed in the engineering manufacturing industry. We already deal all over the world exporting financial services food products. Whisky is exported from Scotland to all over the world so are many other British products. That is project fear coming from the Leave campaign who say we have restrictions to trade that we will be free from, which is partially true but highly exaggerated. Before we joined the EU we were free to trade around the world I can’t remember us going from strength to strength which was halted when we joined. A lot of this is very emotive and people think it is better to be governed by the British government who can’t even leave the EU. Why do we think that the EU is not democratic, that is like Boris Johnson when he stated that the Labour party should not elect a new leader without a general election as a country should choose their own leader. When we leave the EU it will make very little difference it is based on speculation from opinions on both side of the argument. If you view it from a philosophical aspect then it is better in the long term building bridges, not walls. If you view it from the financial aspect then long term our growth rate in the financial sector would improve. If you work in the engineering industry then leaving the EU would without any doubt in my mind festoon us with more and more red tape which I have had to suffer from a long time before the EU
For whom, exactly, are these warnings? For remainers who need no convincing, or leavers who have been told that they are thick, racist and their vote doesn’t count anyway? Either way, it’s not going to make a difference.
Perhaps if MPs, journalists and industry leaders accepted defeat gracefully in June 2016 and worked with leavers to organise a path to leave the EU rather than demonise and attempt to disenfranchise half the population, it would not have come to this.
Let’s be honest. Britain doesn’t really exist anymore beyond an anachronistic veneer of EU polity and Remainers seem to be quite happy with this.
We are little more than an EU regional sub-heading. Brexit negotiations reduced us to a colony and both big business and the media seem quite happy with it. So if we stay – EU regionalisation will eventually dismantle us, if we leave we turn in to an economic basket case (apparently).
So, if we stay, I would like a modicum of honesty from the Remain element in the UK. Accept and admit you don’t really feel anything for democratic values, for Britain, for a meaningful political voice for your children and embrace ever closer union, the end of our nation state; sign us up for the Euro and let us get rid of the wasters in Westminster. Let us stop pretending and just get on with Europe.
could someone explain to me just what was so dratically wrong with membership of the EU? Never found a fault with them whilst travelling-or living here come to that. ]
We have here a fine example of Little Englanders, rather suffer and be FREE!!, than enjoy the customs free trade and travel, be welcomed as a fellow Euro member. No welcome from industry, I note….all up in arms as losing close lnks with European customers/clients. What the hell is wrong with some people…we’ve lost our Empire in case you hadn’t noticed? No captive customers now.
“Poor but Happy”……………
Are there lessons from History that we are missing/forgetting at our peril?
Europe (actually I mean its citizens!)- has suffered from almost continuous conflict throughout history: the purpose/thinking of the original proponents of the political links between us was to ensure that such could/would/should not happen again. Many of my own family/ancestors died (no they were killed!) or were maimed by such…this alone is and has always been my primary reason for supporting the EU: a gathering in whatever format that will ensure that death & destruction has no opportunity to start, let alone devastate. Any activity involving so-called civil servants (neither civil nor give service) will be stupid and wasteful : it is in their job-spec? But the alternative -widows, orphans, cities laid waste, is surely worse.
Failure to grasp the value of frictionless international movement of goods will damage the UK for decades.
The elected representatives in Brussels do a better job than London of redistributing funds (vs the London-centric Westminster). (Incidentally, who elected the House of Lords or the Civil Service?)
A decent negotiating strategy to get a deal with the US would have been “If we leave the EU, let’s have this advantageous deal.” Then show the EU and say “So can you beat this?” I often negotiate large contracts when both sides know we will reach a deal, but we build up trust starting with a sensible price for a sensible core item, and then negotiate on the peripheral items. No need to threaten “no deal”. Instead the UK is acting like we are buying a car and that we are happy to walk to work if we don’t get a good price.
All this so we can resign from being one of the Lords of Europe (and a disproportionately powerful one at that), and instead become the vassal of either Europe or the US.
Several young engineers I know have their emigration plans ready in case they need them.
Boris Johnson 12th May 2013:
The EU “is better placed to strike trade deals with the U.S. or China than the UK on its own. More generally there is a risk that leaving the EU will be globally interpreted as a narrow, xenophobic, backward-looking thing to do”.
Can we believe anything this man says about being “forward- looking, can-do” etc. about frictionless borders, etc? What he forgets is that only a bit more than half of the People want to leave. There is no simple word-play that will get us out of this and a unelected journalist is not who we need to solve it.
Dithering is probably the worst thing of all to do, and our “leaders” seem oblivious to the holds on investment that they are causing. The balance for stay or remain reflects the low real gain or cost in EU membership. I agree with MB that the formation of the EU was a good war-preventer; however, we seem hell-bent on further wars (alongside our American bosses). We should either rescind the notice to quit or get on with it: my own view is, as per Marcus Gibsons views above, that we have nothing to fear from leaving.
Little England; big Europe. Being European has been really excellent for this country, ‘we’ve never had it so good’. ‘You don’t know what you’ve got till it’s gone….. ‘ goes the song. I hope and pray that some wisdom will prevail and we don’t exit after all. I want to stay European.
From an outsiders view, i think the MP’s need to look at the bigger picture. Rather than become an isolated island become part of a much bigger group. Just a thought, rather a small fish in a big pond than a large fish in a small pond.
You’re still going to be European, regardless of EU membership…
How depressing that despite these warnings many still dismiss it as ‘project fear’ or blame it on a lack of patriotism. These people are our industry leaders, engineers, highly qualified CEOs and directors. Instead they choose to listen to some Etonians still fighting the same battles they did as teenagers and who (particularly in the case of Johnson) demonstrably change their story when it will benefit their route to power. We’re supposed to be engineers, making decisions based on data. Not doffing our caps to whichever well spoken son of a baron with a 2:2 in history tells us we should ignore reality and back something that could decimate the economy because “patriotism”.
Except the fact prove otherwise. The UK allowed fisheries to sell their quotas and this they did, freely and of their own volition. The erosion of UK fisheries was purely a resultant form UK mismanagement, as so many of the accusations of EU-malfeasance turn out to be when the facts and evidence is examined.
While UK firms – including SMEs – have benefited from the increases in export orders due to the fall in the Pound, those same exchange rate moves have increased the prices of imports. Moreover, many non-UK firms have moved their supply chains away from the UK in preparation for (any) Brexit, and those same SMEs are now facing reduced availability of labour – particularly skilled labour – in light of the sentiment (warranted or not) of xenophobia that is pervading UK commentators and politicians. As that economic cycle turns more, those higher costs of materials and the inevitable increases in manpower costs will push inflation up and further erode SMEs’ margins, putting more and more out of business. This is not “fear”, it is basic economics, and examples of it can be seen throughout history when countries have faced maxi-devaluation of their currencies.
And all of that for no sustainable and tangible benefit to the UK…