Should Theresa May forsake all optimism and settle for a no-deal Brexit?
As Brexit talks become increasingly more concrete, the UK’s financial future looks drastically different to what was hoped for two years ago. Time and time again, Brexiteers touted the good news of our £27billion dividend, regaining control of our borders and a favourable trade deal because apparently the UK is just that much of an asset. But two years into negotiations and a good deal seems more like a far-fetched dream than a feasible reality.
Brussels remains unwilling to compromise for a soft Brexit. As a result, various MPs, economists and business leaders have urged May to ‘get tough’ with them. May has now threatened to leave the EU with no deal and, according to cabinet minister Liam Fox, she is not bluffing. Expectedly, the Prime Minister’s threat ruffled some business feathers, particularly aerospace company Airbus who have warned that they will leave the UK in the occasion of a no-deal Brexit.
The game-changer in this circumstance is how Brussels ministers respond. Will they do what is unwise in the eyes of Liam Fox and dismiss Theresa May’s words as a bluff? A European diplomat says the UK government ‘makes a fuss’ but gives in eventually, and belief is in the air that a substantial amount of negotiations will occur after the UK has actually left. Brussels is well aware that no deal is a bad idea, and they also know it’s an absolute last resort for the UK. Therefore, if EU ministers remain stiff-necked, preventing negotiations from moving forward, they put the UK government in a position where it may be more beneficial to surrender. Brussels isn’t described as ‘plainly uncooperative’ for no reason.
Theresa May must also consider the effect of essential businesses moving out of the UK. Tom Williams, Chief Operating Officer of Airbus Commercial Aircraft, commented “In any scenario, Brexit has severe negative consequences for the UK aerospace industry and Airbus in particular. Therefore, immediate mitigation measures would need to be accelerated. While Airbus understands that the political process must go on, as a responsible business we require immediate details on the pragmatic steps that should be taken to operate competitively. Without these, Airbus believes that the impacts on our UK operations could be significant. We have sought to highlight our concerns over the past 12 months, without success. Far from Project Fear, this is a dawning reality for Airbus. Put simply, a No Deal scenario directly threatens Airbus’ future in the UK.”
Airbus employs 15,000 people across 25 UK sites, with a supply chain carrying 110,000 jobs. How detrimental would their relocation be? The surge in unemployment, loss in tax revenue and investments; it’s a massive risk. And surely, it won’t be Airbus alone. Already BMW have warned the government about cutting their UK operations as well. The business world was never fond of Brexit, but with the prospects of no-deal, it won’t be business as usual for the UK anymore.
Obviously, it won’t be trading as normal either. The government would have to re-negotiate hundreds of international trade agreements. Though this would take time, on top of the two unsuccessful years already forgone in hopes of striking a wonderful deal, Brexiteers believe re-negotiations give the UK the power she yielded to Brussels in 1970. Being newly single, Britain would enjoy the freedom of negotiating for herself. However, we can’t exactly assume that new agreements will be made swiftly, easily or more beneficially to our economy. It is likely that a World Trade Organisation (WTO) system of trading shall prevail, not forever, but perhaps for longer than Brexiteers had hoped.
Implementing a WTO trade system would violently shake the economy, of course. With the EU being our biggest trading partners, the difference between no tariffs and WTO tariffs will be heavy inflation. It has been estimated that the price of weekly shopping would increase by £5.50. Every household would feel the weight of those kind of widespread price changes.
If a no-deal Brexit is our better option, it is certainly a sorry state of affairs. Anticipating 2019’s leaving day, let the UK brace herself and make preparations for a Brexit the Prime Minister nor the people really wanted.