What Might a Brexit a ‘No Deal’ Mean?

What Might a Brexit a ‘No Deal’ Mean?
September 7, 2018 Hannah Marshallsay
brexit no deal

With the Government seemingly no closer to agreeing terms for departure from the European Union, we look at what a ‘no deal’ might mean for trade inside the EU.

There has been much recently in the press to suggest that Britain still has some way to go in reaching terms with Brussels for its departure from the EU next year. Some commentators see a chaotic ‘no deal Brexit’ now more likely than not. The Government however says that the acceleration of plans for a ‘no deal’ scenario, does not reflect an increased likelihood for a ‘no deal’ outcome – it is about ensuring plans are in place in the unlikely scenario that they need to be relied upon.

With so many mixed messages circulating, it’s difficult to get a handle on what a ‘no deal’ Brexit might mean for trade. We summarise the current advice being offered to businesses and what it could mean for PFE’s customers.

Government guidance papers

The government has recently published a number of guidance papers outlining what will happen should the UK leave the EU on 29 March 2019 with no agreement in place. More than 20 documents have already been published and a total of 84 will be released over the coming weeks. These papers are intended to inform businesses what they need to do to get ready for the possibility of a no deal Brexit, so they can make informed plans and preparations.

If you want to read the papers for yourself, click here for the HMRC’s guidance for trading with the EU if there’s no Brexit deal.

What does a ‘no deal’ scenario look like for trade?

The section on customs and trade within the Government’s papers state that: “If the UK left the EU on 29 March 2019 without a deal, there would be immediate changes to the procedures that apply to businesses trading with the EU. It would mean that the free circulation of goods between the UK and EU would cease”.

At present, freight operations inside the European Union do not require customs declarations. If free trade ceases, there will have to be customs checks and import and export declarations will be required on all goods going across the border. Separate safety and security declarations will need to be made by Eurotunnel, airlines and shippers at freight terminals.

If a ‘no deal’ becomes a reality, or there is an interim/short term deal which expires, the default position will be importing into UK under World Trade Organisation (WTO) rules. Trade will be conducted on WTO terms and importers will have to classify their goods in relation to WTO tariffs.

The Government  says  that it plans to replicate our existing trade regime as far as possible in our new schedules’. This would involve minimal disruption and diminish the options for other members to object. The two areas of conflict are products that are protected (mainly Agricultural) or highly taxed on arrival. The EU will be anxious to ensure UK does not become a low duty entry point into the single market.

The Industry’s viewpoint on a ‘no deal’ Brexit

Industry bodies paint a more hopeful picture than the one presented in the press. The industry viewpoint is that a scenario in which the UK leaves the EU without agreement remains unlikely given the mutual interests of the UK and the EU in securing a negotiated outcome.

BIFA has attended a number of meetings with the Government in recent weeks and have emphasised that in their view, Senior Civil Servants are working hard to ensure that a ‘no deal’ situation does not occur. According to BIFA, the UK government has reached agreement with the EU on the vast majority of withdrawal issues, including the terms of an implementation period. Full agreement on this will mean that trading with the EU during the implementation period will broadly stay the same from the end of March 2019 until 31 December 2020.

What would a ‘no deal’ mean for you?

For PFE’s customers, importing from outside the EU, the impact will be marginal. The UK is a member of the WTO in its own right. At present we work inside WTO under the EU umbrella, under the EU’s set of schedules: a list of commitments that sets the terms of the EU’s tariffs, its quotas and limits on subsidies. The UK could agree its own set of schedules at the WTO. Again there is a implied time frame on this as it must be in place, should we reach a ‘no deal’ conclusion.

The impact of Brexit may be far reaching, we will work with our customers to ensure the impact is minimised and clearly communicated. As the Brexit picture comes into focus we will facilitate our customers to comply with the new regulations that will be required.

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