The United Kingdom is bracing for food shortages, grounded airplanes and economic turmoil as fears grow that the country will leave the European Union next March without a Brexit agreement.
The government has been negotiating a withdrawal deal with the EU ever since British Prime Minister Theresa May triggered the EU exit mechanism last year. That arrangement was supposed to cover future relations and lead to a comprehensive trade deal. But no agreement has been reached so far and some British cabinet ministers have started warning that the United Kingdom might leave without one.
Their comments could be seen as U.K. grandstanding ahead of the final rounds of negotiations, which are set to resume later this month. But the possibility of a no-deal Brexit has begun to take hold, leaving businesses rattled and prompting worrying comments from Bank of England Governor Mark Carney. Last week Mr. Carney said that the “possibility of a no deal is uncomfortably high at this point.” He added that a no-deal departure would disrupt trade and “as a consequence of that, a disruption to the level of economic activity [and], higher prices for a period of time.”
Last week, Bank of England Governor Mark Carney said that the 'possibility of a no deal is uncomfortably high at this point.' He added that a no-deal departure would disrupt trade and 'as a consequence of that, a disruption to the level of economic activity [and], higher prices for a period of time.'DANIEL LEAL-OLIVAS/Getty Images
Financial markets have also reacted to the prospect of Britain leaving without a deal with the pound continuing its slide, falling to its lowest level against the U.S. dollar on Wednesday in nearly a year.
In an interview published on Sunday, International Trade Minister Liam Fox put the likelihood of a no-deal Brexit at 60 per cent. Mr. Fox, a strong supporter of Brexit, blamed intransigence by EU negotiators saying they were “pushing us towards no deal.” His comments came days after Foreign Secretary Jeremy Hunt said both sides were “heading for ‘no deal’ by accident – a ‘no deal’ situation which would have a profound impact on the relations between Britain and the EU countries for a generation.” Meanwhile other cabinet ministers have spoken openly about the need to prepare for possible food shortages and a lack of medical supplies if the United Kingdom leaves the EU without a deal.
If the British leave the EU without an agreement the consequences could be dire. The U.K. government has done little planning for a no-deal scenario and the country could find itself scrambling to cope with long border delays, soaring EU tariffs and no regulatory bodies for everything from medicine and agricultural products to airplanes and cars.
EU tariffs on most U.K. goods would start at around 10 per cent and climb as high as 35 per cent for dairy products. Non-tariff barriers could also cripple the movement of goods and disrupt manufacturers who rely on just-in-time delivery to reduce storage costs.
On Monday, the head of Bombardier Inc.’s operation in Northern Ireland, which makes wings for the Airbus A220, said the company would have to spend up to £30-million ($50-million) to stockpile enough parts to keep its assembly lines operating normally. The Montreal-based company relies on roughly 1,700 shipments of parts and supplies from the EU annually. “What we do not have is another £25- £30-million [worth of parts] to be sitting in a store somewhere either managing an issue which has happened or because we weren’t able to get clarity on what might happen,” Michael Ryan told the Press Association.
A hard Brexit would also put the United Kingdom outside of a host of EU agencies including bodies that regulate airplane safety and license drugs. For example, currently, every airplane part that’s made in the United Kingdom is certified by EU regulators for safety. After Brexit, that certification will no longer exist and airplanes containing the components could be grounded. Drug makers face a similar predicament and fears of supply disruption. The European Medicines Agency (EMA), which regulates drugs, has expressed concern over the availability in the U.K. of 108 medicines manufactured there. As a result, some drug companies, including Sanofi, AstraZeneca and Novartis, have announced plans increase stockpiles of drugs that have already been approved by the EMA in the United Kingdom by as much as 20 per cent.
Many Brexit supporters play down the impact of leaving without a deal, suggesting that people such as Mr. Carney are fear mongering. They argue that it’s in the EU’s interest to have good trading relations with the United Kingdom because it is a significant market for EU goods and services. And they note that even without an agreement, trade with the EU would simply revert to World Trade Organization rules, just like trade between the EU and dozens of other countries including the United States. “Trading with the EU on WTO terms would work well for the U.K. and allows us to achieve Brexit sooner,” Jacob Rees-Mogg, an influential Conservative MP and ardent Brexit backer told reporters last week. “It would save the country £39-billion [in payments to the EU] which the EU desperately needs to balance its budget. So with no deal, the EU would be the loser.”
Earlier this week, Ms. May’s officials said the government believed a deal with the EU was “the most likely outcome." Ms. May has recently proposed a customs arrangement with the EU that would see the United Kingdom remain largely within the bloc’s customs union, which provides for the tariff-free movement of goods among member states.
She has spent the past few days trying to sell the idea to various EU leaders including French President Emmanuel Macron. However, EU negotiators have rejected key parts of her proposal and so far Mr. Macron and other leaders haven’t broken ranks.
Ms. May is also facing growing discontent at home about her handling of Brexit. A poll released on Monday by ORB International found that 60 per cent of voters were not confident she would get a good deal, up from 56 per cent a month ago. A poll for Sky News last week showed that 78 per cent of those surveyed thought the government was doing a bad job negotiating Brexit. That was up 23 points from March.
Paul Waldie