No deal Brexit is no ‘nightmare’ for UK: Economic experts predict BOOM rather than crisis

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The Institute of Economic Affairs has today claimed that a clean exit from the EU may provide more certainty for UK businesses and trade than protracted talks. 

The IEA argues that a hard, “no deal” Brexit would implement a timeline for the UK’s exit from EU trade agreements, avoiding a scenario where a “transition period” becomes “mysteriously permanent”.

“Leaving the single market and the customs union would put the UK in much the same position as the US or China, which both trade extensively with the EU under World Trade Organisation rules. 

“The EU would presumably impose tariffs on goods it imports from the UK. 

Leaving the single market and the customs union would put the UK in much the same position as the US or China, which both trade extensively with the EU under World Trade Organisation rules

Institute of Economic Affairs

“But, as we have noted before, these are likely to average out at around 5 per cent, which would not be a game-changer,” says the IEA in its paper, “Putting some flesh on a ‘bare bones’ Brexit.” 

The IEA adds that a “clean break” along WTO rules would also allow the UK to begin negotiating trade with the rest of the world, to begin rolling back EU regulation and save “straightaway” on EU contributions.

Crucially, however, the IEA argues that current “no deal” Brexit scenarios are based on an assumption that the UK would leave the EU in 2019 without any agreement on a future relationship, which the institute sees as “highly unlikely”.

“This is the basis of the ‘chaotic’ Brexit dreaded by many”, says Julian Jessop, the Chief Economist and Head of the IEA’s Brexit Unit.  

David Davis and the City of London's skylineGETTY

Fears that a ‘no deal’ Brexit would result in chaos are a ‘Halloween scare story’, say experts

“However, no one is seriously arguing that this outcome would be desirable, nor is it remotely likely.

“In reality, it is a straw man which takes Project Fear to a whole new level.” 

Instead, Mr Jessop says it is far more likely that a “no deal Brexit” would involve quitting the single market and customs union in 2019, but still allow for ongoing cooperation in areas that don’t require EU membership, including aviation, trade in drugs for cancer treatment and security. 

“The UK and EU would not be starting from scratch.  

“Pessimists often point out that it takes the EU many years to conclude an agreement with a third country even on relatively straightforward issues, such as landing rights or mutual recognition of regulations including those covering financial services.  

“However, in most cases here it would simply be a question of agreeing that the existing arrangements are satisfactory and that they should be continued, with whatever technical tweaks are necessary following Brexit,” he said.

Mr Jessop did concede that, at the very least, UK exports to the EU would face “enhanced” and likely more expensive customs checks.

“However he added that both sides has “a strong economic interest in keeping trade running smoothly”. 

Moreover, the IEA argued that now is the time for the UK to invest in and rethink its custom infrastructure, and that introducing tariffs on EU imports was not the answer. 

Citing figures from the Resolution Foundation, the IEA says that the average UK household would in-fact be £260 a year worse off if the UK imposed tariffs on all imports from the EU, but £130 better off if it abolished tariffs across the board. 

Mr Jessop concluded: “Fears that a ‘no deal’ Brexit would inevitably result in chaos are a Halloween scare story.

“In reality, both sides would have a strong interest in continuing to cooperate in a wide range of areas, even if the UK leaves the Single Market and Customs Union in 2019.”