Summary

Click here to download a Pdf of this summary of Brexit FactBase (as at 21 August 2022)

A EU and sovereignty

  1. EU’s origins come from the aftermath of WW2 – unifying ideal: a peaceful, united and prosperous Europe
    • Single Market is unique globally in creating near-frictionless trade in goods and services between member states
    • Four freedoms established in 1958
    • When UK joined in 1973, it was clear that membership involved much more than trade
  2. Member states are sovereign nations who benefit from close cooperation
    • UK was sovereign throughout its EU membership
    • UK had a strong influence in the EU and on EU law
    • Majority of UK law determined by UK – not by EU
  3. EU has areas to address but democratic deficit often exaggerated
    • EU uses a democratic model to govern European Commission and approve laws
    • In 2014, a UK government review identified areas for EU to improve (eg democratic accountability and application of subsidiarity)
    • EU has its own reform agenda including better regulation, eurozone and further reform of CAP
  4. UK came before ECJ less frequently than most member states
  5. UK was subject to EU law during the transition period

B UK contribution and benefit

  1. UK net contribution was about 0.4% of GDP and less than 1.2% of public expenditure in 2019
  2. For 2019, UK contribution was:
    • £14.4 billion gross after rebate
    • £7.9 billion net after public/private sector receipts
    • £152 million a week (or 32p per person per day)
  3. Economic benefits of EU membership add an estimated 4% to GDP (IFS):
    • About ten times UK’s net contribution to EU
    • In 2019, GDP was £2.3 trillion and EU membership was worth:
      • ~£90 billion
      • ~£1,700 million a week
      • ~£450 per person for the year
  4. UK financial settlement (what UK owes EU) was about £34 billion at 31 December 2020:
    • Includes £10.1 billion contributions for 2020
  5. From 2021 onwards, UK will pay EU for ongoing participation in EU programmes (e.g. Horizon)

C Immigration

 

  1. Government wishes to reduce immigration, but UK’s ageing population means UK needs more migrant workers not fewer
    • Policy initiatives to reduce migrant workers (e.g. increasing retirement age) will take years to be effective
    • Freedom of Movement rules include controls over EU citizens, but UK decided not to implement them
  2. Net migration from non-EU countries has significantly exceeded that from EU (by four to one over the last decade)
  3. EU migration benefits UK economy overall
    • EU27 citizens of working age are more likely working than UK or non-EU citizens
    • EEA citizens in 2016-17 contributed ~£5 billion to UK public finances
    • Effects of EEA migration on UK wages and employment are small
    • Reduced EU migration to UK damages economy and public services
  4. Brexit has caused:
    • Fewer EU/EEA citizens to arrive and more to leave
    • Rising net migration from non-EU/EEA countries

D Trade and investment

Trade

  1. About 3/4 of global trade is in goods and 1/4 is in services
    • EU, US and China dominate world trade
    • Services trade is growing faster than goods trade
    • Goods trade growth is mainly between developing nations (South–South)
  2. Recent trends in world trade:
    • In 2020, Covid-19 caused sharp fall in global trade
    • In 2021, trade in goods rebounded strongly ahead of 2019 levels but services lagged behind
    • In 2022, Russia’s invasion of Ukraine disrupted trade again
  3. UK ranks:
    • 7th for trade after Germany, Japan and France
    • 10th for goods exports
    • 2nd for services exports
  4. Tariff and non-tariff trade barriers impede trade
    • Non-tariff barriers (such as rules of origin) have much bigger impact than tariffs
    • UK’s red lines limited post-Brexit deal with EU to a basic FTA
    • UK-EU FTA removed tariffs but raised non-tariff barriers
  5. Most EU trade is with other EU27 countries
    • 61% of EU27 exports go to other EU27 countries (2018)
    • UK accounts for less than 6% of EU27 exports
  6. In 2021, UK trade was £1.3 trillion with deficit of £29 billion:
    • Exports £625 billion; imports £654 billion; trade £1,280 billion
    • Surplus on services – £127 billion; deficit on goods – £156 billion
    • Deficit with EU27 of £32 billion; surplus with non-EU of £3 billion
  7. New UK-EU trade agreement is inferior to EU membership
    • Brexit trade barriers reduce UK-EU trade volumes and profitability
    • New red tape means extra costs for UK government and business
  8. Small percentage drop in EU-related trade costs UK £ billions. In 2019:
    • 47% of UK trade was with EU (exports £301 billion, imports £372 billion)
  9. UK aimed to replace existing EU agreements with 70 countries before end of transition. At 1 January 2021:
    • 64 of the 70 had been replaced, accounting for £221.2 billion or 15.6% of UK trade
    • UK had signed Mutual Recognition Agreements with US, Australia and New Zealand

Investment

  • COVID-19 caused a dramatic fall in world business investment and FDI in 2020
    • 2021 saw a marked recovery in many countries, but not in UK
  • UK business investment has not yet returned to pre-pandemic or pre-Brexit levels
  • UK has been an attractive destination for FDI:
    • In 2021, UK ranked 4th globally for FDI stock and 13th for FDI inflows
    • UK’s stock of inward FDI comes mainly from its top trading partners – EU27 and US
    • 2021 was the fifth successive year of falls in inward FDI to the UK
  • Freeports provide limited benefits, but government intends to create ten

E Impact on economy

 

  1. Trade plays a critical role in the economy
    • UK economy will grow more slowly with Brexit than without
    • 80% of UK economy is devoted to services; 10% is devoted to manufacturing
    • Manufacturing accounts for over 50% of UK exports – so critical for trade
  2. UK economy has recovered to pre-pandemic levels but is expected to lag G7 in 2023
    • Since referendum, £ has weakened against $ and €, causing inflation to rise but helping exporters
    • Brexit trade impacts mean UK trade has not recovered as well as other OECD countries
  3. OBR sees economic impacts of Brexit as
    • Reduced GDP of 4%, mainly due to the effect non-tariff barriers with the EU
    • Exports and imports will be around 15% lower in the long run than if UK had remained in EU
    • Trade deals with non-EU countries will have an immaterial impact
    • Long-run impact of £90 billion lost GDP (based on 4% of 2018 GDP)
  4. UK has high employment but low productivity relative to other advanced economies
    • Real wage levels declined between 2008 and 2015 but started to grow in 2018
    • In 2022, real wages are falling as inflation rises

F EU-UK trade agreement (TCA)

 

  1. UK left EU on 31 December 2020
  2. UK-EU TCA agreed 24 December 2020
    • From 1 January 2021, TCA applied provisionally – came into force 1 May 2021
    • Tariff-free, quota-free UK-EU trade
      • Not all GB goods exports to EU are tariff-free
    • TCA creates many new trade barriers for goods and services
      • Controls on food, other animal and plant imports from EU still to be introduced
    • Exclusion from EU programmes (eg Erasmus, Horizon) is major disadvantage
  3. Windsor Framework refines operation of Northern Ireland Protocol
  4. First five-year review of the implementation of the TCA in 2026
    • Economic benefits from refinement will be small
  5. UK Trade and Business Commission ‘Blueprint for Policymakers’
    • 114 recommendations to improve trade relationship
    • Evidence-based
  6. Major economic benefits come from rejoining Single Market and Customs Union

G Impact on industry sectors and regions

 

  1. Several studies (including government’s own analysis) conclude that all UK regions and nearly all industry sectors will be harmed by Brexit
    • Economic impact on some industries (such as automotive and chemicals) is severe
    • Public services, like health and social care, are badly affected because of reliance on EU workers
    • Brexit trade barriers on UK exports create opportunities for EU suppliers to freeze out UK from EU opportunities
  2. 5 sectors expected to bear most of the trade costs:
    • Financial services
    • Automotive
    • Agriculture, food and drink
    • Consumer goods
    • Chemicals and plastics
  3. 3 sectors have the most jobs at risk:
    • Administration and support services
    • Wholesale trade
    • Legal and accounting services
  4. Regions:
    • Least affected: London and South East
    • Most at risk: Cumbria, Hampshire, Herefordshire, Gloucestershire, Lancashire, Leicestershire, East Riding/North Lincolnshire, Warwickshire and Wiltshire
    • High EU exports in vulnerable goods sectors:
      • Northern Ireland and Cornwall (food, live animals and manufactures)
      • Northumberland, Tees Valley and Durham (chemicals, machinery and transport equipment)
      • East Wales (manufactures, machinery and transport equipment)

H Impact on policy areas

 

  1. Policy areas such as science, education and healthcare face common harms from Brexit
  2. Harms include lost funding; lost influence over EU standards; lost participation in EU & international programmes; lost/reduced access to talent
  3. After Brexit, in areas like environment, defence and security, an ongoing partnership and continued cooperation between UK and EU27 remains important for UK’s future success
  4. After Brexit, challenge for UK is to find the will and effective ways to maintain UK involvement and influence on EU27

 

I UK-EU negotiations

  1. Phase 1 prioritised Withdrawal Agreement: principally citizens’ rights, Irish border and financial settlement.
    • UK and EU signed legally binding WA on 24 January 2020
  2. Phase 2 focused on future UK-EU relationship
    • Political Declaration published 14 November 2019 provided principles
    • Detailed negotiations took place during transition to 31 December 2020
  3. Commons rejected WA three times 15 January to 29 March 2019
  4. On 11 April 2029, EU and UK agreed second Art50 extension to 31 October to ratify WA
  5. Subsequent 2019 events:
    • 23 May, UK participated in EU elections
    • 24 July, Boris Johnson became PM
    • 28 August, Parliament prorogued from 10 September to 14 October
    • 24 September, Supreme Court ruled prorogation unlawful & void.
    • 2 October, UK Government proposed changes to WA but these were not seen as workable
    • 17 October, UK agreed a revised WA/PD with EU
    • 19 October, Parliamentary approval withheld until WA Act passed
    • 19 October, UK requested extension to 31 January 2019
    • 22 October, Commons approved second reading of WA Act but rejected short timetable for scrutiny
    • 22 October, Government put WA Act into limbo
    • 28 October, EU agreed a third Art50 extension to 31 January 2020
    • 6 November, Parliament dissolved for General Election
    • 12 December, Conservatives won large parliamentary majority
  6. 24 January 2020, Brexit Withdrawal Agreement signed
  7. 31 January 2020, UK left EU:
    • Article 50 period ended
    • Transition period began
    • Transition lasted to 31 December 2020 (but could have been extended)
  8. EU-UK Trade and Cooperation Agreement agreed 24 December 2020
    • From 1 January 2021, TCA applied provisionally and came into force 1 May 2021
  •  

J 2020 negotiations

  1. UK in transition period until 31 December 2020
    • Little time available for negotiation in 2020: around nine months
    • One-time opportunity for extension before 1 July 2020
  2. EU was open to an extension but UK did not ask for one, despite COVID-19:
    • Impeding negotiations
    • Causing severe economic recession
  3. Future UK-EU partnership’s key elements:
    • Economic partnership
    • Security partnership
    • General (programmes, equivalence, adequacy etc.)
  4. Commission negotiating scope, agreed by European Council, covered:
    • Future relationship with the UK
    • Implementation of the Withdrawal Agreement
    • No-deal preparations
    • Expired on 31 December 2020
  5. UK government stated aims were:
    • Zero tariffs and quotas on UK-EU goods trade
    • Ability to diverge from EU regulations and rules
    • But:
      • EU pre-condition for FTA was UK commitment to level playing field provisions
      • UK’s choice to diverge has definite large costs and uncertain small benefits
  6. UK was almost certainly unable to implement Northern Ireland Protocol by December 2020:
    • Practical and political disruption in NI
    • UK could be taken to ECJ
  7. Brexit discussions did not finish on 31 December 2020
    • Implementation activities will continue in 2021 and probably beyond
  8. Basic FTA had several advantages over ‘no deal’

K 'No deal'

  1. ‘No deal’ would have meant no UK-EU agreement beyond the Withdrawal Agreement
  2. Government found impact of ‘no deal’ would have been significant (even without effects of Covid-19)
    • Yellowhammer planning assumptions
  3. UK and EU trade with tariffs on exports to EU and imports to UK (the main differences of ‘no deal’ with the TCA)
  4. As with TCA, ‘no deal’ would have meant a major increase in non-tariff barriers to EU-UK trade:
    • No bilateral UK-EU agreements e.g. fisheries, agriculture
    • EU imposes its standard ‘third-country’ tariffs on UK goods exports to EU
    • EU does not grant UK regulatory equivalence for financial services nor adequacy for data
    • New border procedures and regulatory certification for UK exports to EU: confusion and queues at borders
    • New non-tariff barriers damage UK-EU services trade
    • Price rises and shortages in shops: notably food
    • UK citizens lose rights to freedom of movement in EEA: work, education, travel
    • UK benefits from ‘rolled-over’ trade agreements with other countries
  5. Immediate and long-run economic damage for UK on top of Covid-19 effects
    • Long-run cost to GDP estimated at 6% (TCA costs 4%)
  6. No agreement on the future UK-EU partnership in critical policy areas
    • Defence and security: no basis for future UK participation with EU27 systems and agencies critical for UK security
    • Science and education:
      • Loss of Horizon 2020 and Erasmus participation
      • Reduced opportunities and mobility of talent
      • Reduced participation in international science programmes, loss of funding etc.
  7. Longer-term, ‘no deal’ would have meant:
    • Years of post-Brexit negotiations with EU and others
    • Worst long-term economic impact of all Brexit options
    • UK negotiating position would have been weak

Brexit FactBase

Summary

As at 21 August 2022

A EU and sovereignty

  1. EU’s origins come from the aftermath of WW2 – unifying ideal: a peaceful, united and prosperous Europe
    • Single Market is unique globally in creating near-frictionless trade in goods and services between member states
    • Four freedoms established in 1958
    • When UK joined in 1973, it was clear that membership involved much more than trade
  2. Member states are sovereign nations who benefit from close cooperation
    • UK was sovereign throughout its EU membership
    • UK had a strong influence in the EU and on EU law
    • Majority of UK law determined by UK – not by EU
  3. EU has areas to address but democratic deficit often exaggerated
    • EU uses a democratic model to govern European Commission and approve laws
    • In 2014, a UK government review identified areas for EU to improve (eg democratic accountability and application of subsidiarity)
    • EU has its own reform agenda including better regulation, eurozone and further reform of CAP
  4. UK came before ECJ less frequently than most member states
  5. UK was subject to EU law during the transition period

B UK contribution and benefit

  1. UK net contribution was about 0.4% of GDP and less than 1.2% of public expenditure in 2019
  2. For 2019, UK contribution was:
    • £14.4 billion gross after rebate
    • £7.9 billion net after public/private sector receipts
    • £152 million a week (or 32p per person per day)
  3. Economic benefits of EU membership add an estimated 4% to GDP (IFS):
    • About ten times UK’s net contribution to EU
    • In 2019, GDP was £2.3 trillion and EU membership was worth:
      • ~£90 billion
      • ~£1,700 million a week
      • ~£450 per person for the year
  4. UK financial settlement (what UK owes EU) was about £34 billion at 31 December 2020:
    • Includes £10.1 billion contributions for 2020
  5. From 2021 onwards, UK will pay EU for ongoing participation in EU programmes (e.g. Horizon)

C Immigration

 

  1. Government wishes to reduce immigration, but UK’s ageing population means UK needs more migrant workers not fewer
    • Policy initiatives to reduce migrant workers (e.g. increasing retirement age) will take years to be effective
    • Freedom of Movement rules include controls over EU citizens, but UK decided not to implement them
  2. Net migration from non-EU countries has significantly exceeded that from EU (by four to one over the last decade)
  3. EU migration benefits UK economy overall
    • EU27 citizens of working age are more likely working than UK or non-EU citizens
    • EEA citizens in 2016-17 contributed ~£5 billion to UK public finances
    • Effects of EEA migration on UK wages and employment are small
    • Reduced EU migration to UK damages economy and public services
  4. Brexit has caused:
    • Fewer EU/EEA citizens to arrive and more to leave
    • Rising net migration from non-EU/EEA countries

D Trade and investment

Trade

  1. About 3/4 of global trade is in goods and 1/4 is in services
    • EU, US and China dominate world trade
    • Services trade is growing faster than goods trade
    • Goods trade growth is mainly between developing nations (South–South)
  2. Recent trends in world trade:
    • In 2020, Covid-19 caused sharp fall in global trade
    • In 2021, trade in goods rebounded strongly ahead of 2019 levels but services lagged behind
    • In 2022, Russia’s invasion of Ukraine disrupted trade again
  3. UK ranks:
    • 7th for trade after Germany, Japan and France
    • 10th for goods exports
    • 2nd for services exports
  4. Tariff and non-tariff trade barriers impede trade
    • Non-tariff barriers (such as rules of origin) have much bigger impact than tariffs
    • UK’s red lines limited post-Brexit deal with EU to a basic FTA
    • UK-EU FTA removed tariffs but raised non-tariff barriers
  5. Most EU trade is with other EU27 countries
    • 61% of EU27 exports go to other EU27 countries (2018)
    • UK accounts for less than 6% of EU27 exports
  6. In 2021, UK trade was £1.3 trillion with deficit of £29 billion:
    • Exports £625 billion; imports £654 billion; trade £1,280 billion
    • Surplus on services – £127 billion; deficit on goods – £156 billion
    • Deficit with EU27 of £32 billion; surplus with non-EU of £3 billion
  7. New UK-EU trade agreement is inferior to EU membership
    • Brexit trade barriers reduce UK-EU trade volumes and profitability
    • New red tape means extra costs for UK government and business
  8. Small percentage drop in EU-related trade costs UK £ billions. In 2019:
    • 47% of UK trade was with EU (exports £301 billion, imports £372 billion)
  9. UK aimed to replace existing EU agreements with 70 countries before end of transition. At 1 January 2021:
    • 64 of the 70 had been replaced, accounting for £221.2 billion or 15.6% of UK trade
    • UK had signed Mutual Recognition Agreements with US, Australia and New Zealand

Investment

  • COVID-19 caused a dramatic fall in world business investment and FDI in 2020
    • 2021 saw a marked recovery in many countries, but not in UK
  • UK business investment has not yet returned to pre-pandemic or pre-Brexit levels
  • UK has been an attractive destination for FDI:
    • In 2021, UK ranked 4th globally for FDI stock and 13th for FDI inflows
    • UK’s stock of inward FDI comes mainly from its top trading partners – EU27 and US
    • 2021 was the fifth successive year of falls in inward FDI to the UK
  • Freeports provide limited benefits, but government intends to create ten

E Impact on economy

 

  1. Trade plays a critical role in the economy
    • UK economy will grow more slowly with Brexit than without
    • 80% of UK economy is devoted to services; 10% is devoted to manufacturing
    • Manufacturing accounts for over 50% of UK exports – so critical for trade
  2. UK economy has recovered to pre-pandemic levels but is expected to lag G7 in 2023
    • Since referendum, £ has weakened against $ and €, causing inflation to rise but helping exporters
    • Brexit trade impacts mean UK trade has not recovered as well as other OECD countries
  3. OBR sees economic impacts of Brexit as
    • Reduced GDP of 4%, mainly due to the effect non-tariff barriers with the EU
    • Exports and imports will be around 15% lower in the long run than if UK had remained in EU
    • Trade deals with non-EU countries will have an immaterial impact
    • Long-run impact of £90 billion lost GDP (based on 4% of 2018 GDP)
  4. UK has high employment but low productivity relative to other advanced economies
    • Real wage levels declined between 2008 and 2015 but started to grow in 2018
    • In 2022, real wages are falling as inflation rises

F EU-UK trade agreement (TCA)

 

  1. UK left EU on 31 December 2020
  2. UK-EU TCA agreed 24 December 2020
    • From 1 January 2021, TCA applied provisionally – came into force 1 May 2021
    • Tariff-free, quota-free UK-EU trade
      • Not all GB goods exports to EU are tariff-free
    • TCA creates many new trade barriers for goods and services
      • Controls on food, other animal and plant imports from EU still to be introduced
    • Exclusion from EU programmes (eg Erasmus, Horizon) is major disadvantage
  3. Windsor Framework refines operation of Northern Ireland Protocol
  4. First five-year review of the implementation of the TCA in 2026
    • Economic benefits from refinement will be small
  5. UK Trade and Business Commission ‘Blueprint for Policymakers’
    • 114 recommendations to improve trade relationship
    • Evidence-based
  6. Major economic benefits come from rejoining Single Market and Customs Union

G Impact on industry sectors and regions

 

  1. Several studies (including government’s own analysis) conclude that all UK regions and nearly all industry sectors will be harmed by Brexit
    • Economic impact on some industries (such as automotive and chemicals) is severe
    • Public services, like health and social care, are badly affected because of reliance on EU workers
    • Brexit trade barriers on UK exports create opportunities for EU suppliers to freeze out UK from EU opportunities
  2. 5 sectors expected to bear most of the trade costs:
    • Financial services
    • Automotive
    • Agriculture, food and drink
    • Consumer goods
    • Chemicals and plastics
  3. 3 sectors have the most jobs at risk:
    • Administration and support services
    • Wholesale trade
    • Legal and accounting services
  4. Regions:
    • Least affected: London and South East
    • Most at risk: Cumbria, Hampshire, Herefordshire, Gloucestershire, Lancashire, Leicestershire, East Riding/North Lincolnshire, Warwickshire and Wiltshire
    • High EU exports in vulnerable goods sectors:
      • Northern Ireland and Cornwall (food, live animals and manufactures)
      • Northumberland, Tees Valley and Durham (chemicals, machinery and transport equipment)
      • East Wales (manufactures, machinery and transport equipment)

H Impact on policy areas

 

  1. Policy areas such as science, education and healthcare face common harms from Brexit
  2. Harms include lost funding; lost influence over EU standards; lost participation in EU & international programmes; lost/reduced access to talent
  3. After Brexit, in areas like environment, defence and security, an ongoing partnership and continued cooperation between UK and EU27 remains important for UK’s future success
  4. After Brexit, challenge for UK is to find the will and effective ways to maintain UK involvement and influence on EU27

 

I UK-EU negotiations

  1. Phase 1 prioritised Withdrawal Agreement: principally citizens’ rights, Irish border and financial settlement.
    • UK and EU signed legally binding WA on 24 January 2020
  2. Phase 2 focused on future UK-EU relationship
    • Political Declaration published 14 November 2019 provided principles
    • Detailed negotiations took place during transition to 31 December 2020
  3. Commons rejected WA three times 15 January to 29 March 2019
  4. On 11 April 2029, EU and UK agreed second Art50 extension to 31 October to ratify WA
  5. Subsequent 2019 events:
    • 23 May, UK participated in EU elections
    • 24 July, Boris Johnson became PM
    • 28 August, Parliament prorogued from 10 September to 14 October
    • 24 September, Supreme Court ruled prorogation unlawful & void.
    • 2 October, UK Government proposed changes to WA but these were not seen as workable
    • 17 October, UK agreed a revised WA/PD with EU
    • 19 October, Parliamentary approval withheld until WA Act passed
    • 19 October, UK requested extension to 31 January 2019
    • 22 October, Commons approved second reading of WA Act but rejected short timetable for scrutiny
    • 22 October, Government put WA Act into limbo
    • 28 October, EU agreed a third Art50 extension to 31 January 2020
    • 6 November, Parliament dissolved for General Election
    • 12 December, Conservatives won large parliamentary majority
  6. 24 January 2020, Brexit Withdrawal Agreement signed
  7. 31 January 2020, UK left EU:
    • Article 50 period ended
    • Transition period began
    • Transition lasted to 31 December 2020 (but could have been extended)
  8. EU-UK Trade and Cooperation Agreement agreed 24 December 2020
    • From 1 January 2021, TCA applied provisionally and came into force 1 May 2021
  •  

J 2020 negotiations

  1. UK in transition period until 31 December 2020
    • Little time available for negotiation in 2020: around nine months
    • One-time opportunity for extension before 1 July 2020
  2. EU was open to an extension but UK did not ask for one, despite COVID-19:
    • Impeding negotiations
    • Causing severe economic recession
  3. Future UK-EU partnership’s key elements:
    • Economic partnership
    • Security partnership
    • General (programmes, equivalence, adequacy etc.)
  4. Commission negotiating scope, agreed by European Council, covered:
    • Future relationship with the UK
    • Implementation of the Withdrawal Agreement
    • No-deal preparations
    • Expired on 31 December 2020
  5. UK government stated aims were:
    • Zero tariffs and quotas on UK-EU goods trade
    • Ability to diverge from EU regulations and rules
    • But:
      • EU pre-condition for FTA was UK commitment to level playing field provisions
      • UK’s choice to diverge has definite large costs and uncertain small benefits
  6. UK was almost certainly unable to implement Northern Ireland Protocol by December 2020:
    • Practical and political disruption in NI
    • UK could be taken to ECJ
  7. Brexit discussions did not finish on 31 December 2020
    • Implementation activities will continue in 2021 and probably beyond
  8. Basic FTA had several advantages over ‘no deal’

K 'No deal'

  1. ‘No deal’ would have meant no UK-EU agreement beyond the Withdrawal Agreement
  2. Government found impact of ‘no deal’ would have been significant (even without effects of Covid-19)
    • Yellowhammer planning assumptions
  3. UK and EU trade with tariffs on exports to EU and imports to UK (the main differences of ‘no deal’ with the TCA)
  4. As with TCA, ‘no deal’ would have meant a major increase in non-tariff barriers to EU-UK trade:
    • No bilateral UK-EU agreements e.g. fisheries, agriculture
    • EU imposes its standard ‘third-country’ tariffs on UK goods exports to EU
    • EU does not grant UK regulatory equivalence for financial services nor adequacy for data
    • New border procedures and regulatory certification for UK exports to EU: confusion and queues at borders
    • New non-tariff barriers damage UK-EU services trade
    • Price rises and shortages in shops: notably food
    • UK citizens lose rights to freedom of movement in EEA: work, education, travel
    • UK benefits from ‘rolled-over’ trade agreements with other countries
  5. Immediate and long-run economic damage for UK on top of Covid-19 effects
    • Long-run cost to GDP estimated at 6% (TCA costs 4%)
  6. No agreement on the future UK-EU partnership in critical policy areas
    • Defence and security: no basis for future UK participation with EU27 systems and agencies critical for UK security
    • Science and education:
      • Loss of Horizon 2020 and Erasmus participation
      • Reduced opportunities and mobility of talent
      • Reduced participation in international science programmes, loss of funding etc.
  7. Longer-term, ‘no deal’ would have meant:
    • Years of post-Brexit negotiations with EU and others
    • Worst long-term economic impact of all Brexit options
    • UK negotiating position would have been weak