Last reviewed 1 March 2019

Several years after everyone else grew bored with quoting Aleksandr the meerkat, the Prime Minister introduced his catchphrase into Hansard when she told the SNP’s Westminster leader that if he (and others) want to put an end to Brexit uncertainty then all they have to do is to vote for her deal — simples. She was speaking as she yet again faced the House to make a statement about the ongoing negotiations. However, with barely a month left before what the Government in all its contingency legislation calls “exit day”, Mrs May this time had the threat of a revolt by Remain-supporting members of her Cabinet to deal with. Tired of what they see as continuous compliance with the demands of the strongly Eurosceptic European Research Group (ERG), several ministers in favour of remaining in the EU had made it clear that they would resign if she persisted in keeping the option of “no deal” on the table.

It’s a date

The Prime Minister was therefore facing the possibility that members of her Cabinet would support an amendment, proposed by Labour’s Yvette Cooper and Tory MP Sir Oliver Letwin, designed to rule out the prospect of a no-deal exit by delaying Brexit day. Her response was to effectively hijack the amendment by promised to allow MPs a vote on the two options — delaying departure from the EU and ruling out no deal — if they again reject her deal (in a vote to be held on 12 March). Should they do so, then on the following day they will be asked if they support a no-deal Brexit: assuming they say no, then 14 March will see them invited to vote for or against requesting an extension to the two-year Article 50 negotiation process in order to delay EU withdrawal beyond 29 March.

Assuming they opt for this, and assuming the EU agrees (at a summit in Brussels on 21 March), it would probably mean that Brexit day would move back by about three months to some point in June. With the next elections to the European Parliament due to be held in the period 23–26 May 2019, and the first meeting of the new Parliament set for the beginning of July, it would seem to be impossible for any extension to Article 50 to extend much further as otherwise the UK would need to take part in those elections — anathema to the staunch Brexiteers in Mrs May’s party.

Playing for time

At first glance, this all sets up yet another delay, allowing the clock to tick ever closer to the point at which the UK is legally bound to leave the EU. Mrs May’s concession has, however, put another option into play: to the often repeated mantra of deal or no deal must now be added “wait a little longer”. With every analyst pointing to a huge majority in Parliament for voting down the possibility of no deal, this implies that the likeliest outcome of the latest moves will be that the new exit day will be set as late June and the Prime Minister will no longer have leaving without a deal as part of her negotiating armoury.

If, as many suspect, her tactics all along have been to postpone a decision until the last possible moment — in the hope that either the EU would concede late changes to the Withdrawal Agreement or her recalcitrant Brexiteers would agree to support her deal to prevent the possibility of Brexit not happening at all — the Prime Minister’s position is not greatly altered. Both those possibilities remain in play but it will become ever more difficult for Mrs May to take the country to the brink of leaving if Parliament has told her that doing so without a deal cannot be allowed to happen.

The impact of no deal

Given a no-deal scenario, even if a smooth, orderly transition to World Trade Organization (WTO) rules is assumed, the UK economy would be between 6.3% and 9% smaller in the long term (after around 15 years) than it otherwise would have been when compared with today’s arrangements. This estimate is not provided by any organisation campaigning for remaining in the EU or for another referendum: it is a direct quote from a Government report, Implications for Business and Trade of a No Deal Exit on 29 March 2019. Available here, this goes on to show that some parts of the UK would be even more badly affected, with the northeast of England suffering a 10.5% drop in gross domestic product. “Despite the steps being taken by Government to manage the negative effects of no deal, there are a number of areas where the impact on trade, businesses and individuals would be particularly significant,” the report points out.

These include:

  • border issues, including inbound and outbound “roll-on, roll-off” (ro-ro) road traffic

  • tariffs, given the possibility that the EU would introduce tariffs of around 70% on beef and 45% on lamb exports, and 10% on finished automotive vehicles

  • the service sector, which relies heavily on the free movement of people and a range of cross-cutting regulation such as mutual recognition of qualifications

  • just-in-time industries; and, of course

  • Northern Ireland, where border issues remain at the heart of Mrs May’s problem with the ERG and DUP.

Business worries deepen

Given that these serious implications of a no-deal Brexit are spelled out in an official report, it is hardly surprising that business groups in the UK are becoming increasingly concerned. Their worries have been compounded by the Government’s recently published update on its post-Brexit trade deal negotiations. Issued by the Department for International Trade (DIT), the statement confirmed that agreements have been signed only with Switzerland, Chile, the Faroe Islands, Eastern and Southern Africa, Israel and the Palestinian Authority.

In the view of Dr Adam Marshall, Director General at the British Chambers of Commerce (BCC), politicians “have overpromised and underdelivered” on their ability to strike trade deals. The lack of progress is an incredibly disappointing, though not an unexpected admission, he said — and it is businesses and consumers both at home and abroad that will pay the price. For over two years the BCC has warned the Government that the replication of EU trade agreements would not be easy, added Dr Marshall, and it is vital that more of the existing deals are rolled over before the UK leaves the Union.

For the CBI, it was the news that trade deals with major economies such as Japan, South Korea and Turkey will not be in place in the event of a no-deal Brexit that was the most alarming. Director of International Trade and Investment Ben Digby said that this will come as an unwelcome surprise to many companies. UK trade deals currently span five continents through the EU’s agreements with more than 60 countries, he explained, and these European deals underpin the smooth export of goods and services from the UK. Exports to countries with EU free trade agreements are in fact worth more than £41 billion to the UK every year. “It is vital ‘no deal’ is taken off the table to unlock transition, allowing the UK to remain part of these deals and provide space to agree new arrangements,” Mr Digby concluded.

Warning from the EU

The European Commission has also warned of the impact of a no-deal Brexit, although their concern is more for companies in the other 27 Member States. In a five-step checklist of the steps that these businesses need to take, available here, it suggests that they should consider applying for Authorised Economic Operator (AEO) status from their national customs authority, and that they should talk to suppliers, intermediaries, carriers and other partners to establish what impact Brexit might have on them.

Take your positions

As the Brexit negotiations head towards some sort of a conclusion, the various players seem to be clinging to well-worn arguments. Mrs May repeats that her “absolute focus” is on getting a deal in place for 29 March; Jeremy Corbyn still wants a “comprehensive customs union” (although he has finally yielded to pressure from his party and called for a public vote on whatever agreement the Government reaches with the EU); leader of the ERG Jacob Rees-Mogg has accused those advocating delay of plotting to stop Brexit altogether; and the EU has continued to insist that the Withdrawal Agreement will not be reopened and that the Irish backstop must be retained in order to prevent the possibility of a hard border having to be reinstated between Northern Ireland and the Republic.

Meanwhile, business remains bemused at the political manoeuvring with the BCC saying of the latest moves by Mrs May: “While this may be a giant political leap for the Prime Minister, it is only a small step towards the clarity and precision that businesses need to chart their future direction.”

And what of the Chancellor in all this? On 13 March, the date set for a no-deal vote, Philip Hammond is due to deliver the Government’s Spring Statement. As he attempts to prepare plans for future growth and spending with the fate of Brexit still undecided, he surely deserves some sympathy.