A no-deal Brexit would cause “severe” damage to UK businesses, according to the Confederation of British Industry (CBI).
Carolyn Fairbairn, director general of the lobby group, told BBC that quitting the EU without an agreement should be an option “that is not even considered”. Claims that firms are ready for a no-deal scenario are “just not true”, she added.
Carolyn Fairbairn is director-general of the Confederation of British Industry - CBI - and former non-executive director of the Competition and Markets Authority, Lloyds Banking Group and the UK Statistics Authority.
“How can you be prepared for £20bn of increased customs costs, how can be you prepared for tariffs rising overnight, 150,000 businesses have no systems in place to deal with this,” Fairbairn said. “This is not a responsible strategy for a government to have.”
The CBI boss spoke out after her organisation sent an open letter to all the candidates in the Tory leadership race that said: “Firms large and small are clear that leaving the EU with a deal is the best way forward.”
“Short-term disruption and long-term damage to British competitiveness will be severe if we leave without one,” the letter continues. “The vast majority of firms can never be prepared for no-deal, particularly our [small and medium-sized] members who cannot afford complex and costly contingency plans."
Boris Johnson has insisted that the UK must leave the EU by 31 October with or without a deal.
So what would a no-deal scenario entail?
What do the Brexiteers say?
Many senior Leave supporters think that no deal “would be perfectly acceptable as long as sufficient preparations have been made”, according to the BBC’s Chris Morris.
Backbench Brexiteers have sought to present a so-called “cliff edge” Brexit as an opportunity rather than a threat, and have dismissed claims to the contrary as Remainer scaremongering.
“It’s Project Fear mark two,” one MP told The Guardian. “Do they think we can’t see that they’re trying to alarm people?”
Liz Bilney, CEO of Leave.EU, argues that a no-deal Brexit should be seen as a positive. “It is at worst, benign, at best, a fabulous opportunity for a fairer, more prosperous Britain,” she claims.
Former Brexit secretary David Davis says there might even be advantages if the pound were to fall sharply in value following a no-deal exit.
“The pound’s always been too high from the point of view of industry because of the effect of the City. So our competitive position with vis-a-vis Europe would be dramatically better even if there are tariffs,” he told parliamentary magazine The House.
What about critics of a no-deal scenario?
Others argue that leaving without an agreement would have disastrous consequences for businesses, create chaos at the borders, drive up food prices and lead to a shortage of essential goods.
Health Secretary Matt Hancock has warned medical drug companies to expect six months of “significantly reduced access” to the main trade routes between Britain and Continental Europe if there is a no-deal Brexit.
In a damning report, Kent County Council also warned about the potential effect on key services.
“Bodies may remain uncollected and children might miss exams due to gridlocked roads in the event of a no-deal Brexit”, the report said.
Refuse could be left outside homes and food deliveries be disrupted as the county copes with 10,000 lorries clogging up its roads, the council added.
A government spokesperson said support would be provided to local authorities.
Former attorney general Dominic Grieve, a leading Conservative Remainer, has warned that a no-deal Brexit would be “absolutely catastrophic” for the UK.
“We've got to be realistic about this,” he told Sky News. “We will be in a state of emergency.”
A number of business leaders have voiced similar fears, with Amazon UK chief Doug Gurr predicting that Britain will descend into “civil unrest” within weeks if it leaves the EU with no trade deal in place.
“Despite Brexiteer claims, this is not a rerun of ‘Project Fear’,” says an editorial in the Financial Times. “Leaving the EU without formal agreements would result in instant, harsh consequences.”
What do we know for sure?
No-deal Brexit is still the default outcome if MPs cannot agree anything else and there are no further extensions beyond 31 October.
Commons Speaker John Bercow has said that just because no-deal is the default position in law, it is not inevitable, and is insisting that Parliament must have a final say.
MPs have already voted to block such a move, although this was non-binding. Nevertheless, Bercow has said: “There is a difference between a legal default position and what the interplay of different political forces in Parliament will facilitate.”
If a formal withdrawal treaty has not been ratified by this point, however, all EU rules and regulations will instantly cease to apply to the UK.
This means there will be no remaining agreements between Britain and the EU on how to manage customs, trade, travel or citizens rights.
A no-deal Brexit also means that the transition period - designed to give businesses and organisations additional time to respond to the changes - would be off the table.
However, there is a possibility that the EU could once again extend the negotiation period. The European Council President Donald Tusk “hinted Brexit could be delayed further as he said British MEPs may be members of the Parliament for more than several months”, reports ITV News.
But the belief that the EU would be willing to give the UK more time come October may be misguided, with Germany’s foreign minister Heiko Mass telling the Financial Times: “They will have to decide what they want by October. You cannot drag out Brexit for a decade.”
What does this mean for trade?
Without a bilateral trade deal with the EU, Britain would be subject to World Trade Organization (WTO) rules. UK exports would face the same customs checks and tariffs as other countries outside of the EU. Experts agree that the overnight end of frictionless zero-tariff trade would be likely to increase the price of some goods, lead to shortages, and cause significant delays on both sides of the Channel.
Leaked research carried out by the UK’s own Brexit department suggests that without deals on customs and trade, parts of Britain would run out of food and even medicines within a fortnight of the present agreements lapsing, according to an editorial last year in The Guardian. “And that is not the worst possible scenario: it is one that lies in the middle of the range of possibilities,” the newspaper adds.
However, the Government says that contingency planning for this is already under way. The provisions would include stockpiling food and medicines and turning parts of the A20 in Dover into a permanent lorry park.
The UK government has been accused of “watering down” citizens’ rights, after admitting that its treatment of EU nationals would change in a no-deal scenario.
In December, the Home Office published plans that said “the policy for those from other EU countries living in the UK will shift slightly to make deadlines tighter and making it harder for families to move over”, reports the i news site.
Under those plans, EU nationals already in the country would enjoy similar rights to those they have today in a no deal but, at the time, this only applied to those who arrived before 29 March 2019, the original Brexit deadline.
The UK and Ireland maintain that a hard border will not return to Northern Ireland, even in the event of a no-deal Brexit. But if the UK were to leave without an agreement in place, the Republic would come under huge pressure from Brussels to exert customs and immigration controls.
“However, the free movement of people – the most psychologically significant aspect of the Irish border – should be unaffected,” according to i news.
Who is right?
Even with the Government’s contingency planning, leaving the bloc without any agreement in place would result in major disruption to trade, no protection of citizenship rights, and the likelihood of a customs frontier in Northern Ireland.