No-deal Brexit
A no-deal Brexit (also called a clean-break Brexit)[1] was the potential withdrawal of the United Kingdom (UK) from the European Union (EU) without a withdrawal agreement. Under Article 50 of the Maastricht Treaty, the Treaties of the European Union would have ceased to apply once a withdrawal agreement was ratified or if the two years had passed since a member state had indicated its will to leave the European Union. The two-year period could have been extended by unanimous consent from all member states, including the member state that was wishing to leave the European Union.
Without such an agreement in place at the end of the period specified in Article 50, EU law and other agreements would have ceased to apply to the established interactions between the UK and the rest of the EU. Additionally, British interactions with non-EU countries that had been governed by EU agreements with those countries may have needed to be renegotiated, as well.
Short-term (90-day) cross-border travel for tourism was expected to continue as before, albeit with some inconvenience to aviation schedules. While trading of goods (though not services) could have continued to operate under World Trade Organization (WTO) most favoured nation rules, some significant disruption to established trade flows was anticipated and the UK and the EU had prepared agreements and (short-term) understandings for the more serious risks anticipated to arise. Operation Yellowhammer was the codename used by HM Treasury for cross-government civil contingency planning for the possibility of a no-deal Brexit.[2][3]
A renegotiated withdrawal agreement was ratified by Parliament in January 2020, and Brexit occurred at 23:00 GMT on 31 January 2020 (00:00 CET on 1 February). A Brexit transition period began at that point, to allow the sides to negotiate a trade agreement and to give time for the sides to prepare for the consequences of that agreement.
On 24 December 2020, the President of the European Commission and the Prime Minister of the UK agreed in principle to a draft EU–UK Trade and Cooperation Agreement. The Parliament of the United Kingdom ratified this agreement on 30 December 2020 and the European Parliament ratified it in late April 2021.[4] The EU and UK agreed to apply the draft agreement with effect from 1 January 2021.
Events of 2019[edit]
In May 2019, the Speaker of the House of Commons advised that while a no-deal exit on 31 October 2019 was the current default position in law, it was not credible that Parliament could be deprived of the right to intervene should it wish to do so.[5]
In July 2019 Boris Johnson became Prime Minister of the United Kingdom and Leader of the Conservative Party. The Department for Exiting the European Union, which had previously been responsible for Brexit negotiations, was refocused to concentrate on no-deal planning,[6] with an additional £1 billion in funding for preparations for a no-deal Brexit.[7] Johnson appointed Michael Gove to the Cabinet with the responsibility for co-ordination of planning across Government Departments for a no-deal Brexit,[6] declaring that Gove would "turbo-charge" the UK's preparations for a no-deal Brexit on 31 October.[8]
In August 2019, The Guardian reported that British diplomats would pull out from the EU's decision making meetings "within days", under plans being drawn up by Downing Street.[9] That newspaper also said in the same month that any attempt to bypass MPs could create a constitutional crisis.[10] On 21 August 2019, Angela Merkel offered and Boris Johnson accepted a suggestion that the British Government should come up with a viable alternative to the backstop,[11] and on the same day the President of France Emmanuel Macron indicated that no deal was the most likely Brexit outcome due to the inability of the UK to accept the withdrawal agreement.[12] At an interview with the BBC at the 45th G7 summit in late August 2019 Johnson suggested that the chances of achieving a Brexit deal were now "touch and go". He had previously stated that the odds of a no-deal exit were "a million to one".[13] On 28 August 2019, the Johnson ministry reopened negotiations on the withdrawal agreement, but set as a pre-condition that the Irish backstop must be scrapped before doing so, a condition to which the EU had declared it would not agree.[14]
On 30 October 2019, the day named as "exit day" in British legislation was changed to 31 January 2020 at 11.00 p.m.[15]
Projected consequences of a no-deal Brexit[edit]
Budget contributions and divorce bill[edit]
The UK's recurrent contributions to the EU budget would have ceased. (A House of Commons briefing paper issued in June 2016 stated that the average net contribution for the years 2013 to 2017 was £7.9 billion per annum.)[16] The withdrawal agreement negotiated by Prime Minister Theresa May included an understanding that the UK would need to pay a "divorce" bill of £39 billion for previous and long-term commitments.[17] On 25 August 2019 it was reported that a British government legal team had advised that the amount due should a no-deal Brexit eventuate would be £9 billion and possibly as low as £7 billion.[17]
Economy[edit]
Analysis by Her Majesty's Treasury in 2016 predicted that a no-deal Brexit, whereby the UK left the EU and traded with the EU only on WTO terms without any new deals being negotiated, would have resulted in a 7.5% decrease in GDP after 15 years for the UK (relative to where it would otherwise have been were the UK to have remained a member of the EU).[18] In April 2019 the International Monetary Fund published analysis showing that, in the event of a no-deal Brexit occurring during 2019, the UK's GDP would be 3.5% smaller by 2021 than it would have been had a withdrawal agreement been made during that year (2019). The IMF also predicted a 0.5% reduction in GDP relative to where it otherwise would have been for the rest of the EU by 2021 as a result of a no-deal Brexit.[19] In June 2019 the Office of Budget Responsibility published analysis predicting that the economy would shrink by 2% of GDP by 2021 if a no-deal Brexit occurred during 2019, but where the UK's exit was not "disruptive or disorderly".[20]
Economists at think tank The Policy Exchange criticised the Treasury, IMF and OECD forecasts for their reliance on a gravity model with what they said were incorrect assumptions.[21] Specifically, these forecasts relied on the comparison between firstly the average gain in trade between EU countries and secondly the average gain in trade between EU countries and the rest of the world. For example, the Treasury's forecast showed that trade in goods had increased 115% more between EU countries compared to trade between the EU and the rest of the world over the timeline of the EU. The authors pointed to various problems with this, including that 115% was the average across all EU countries and UK-specific analysis leads to significantly lower number in the 20% to 30% range, that currency fluctuations should have reduced some of the impact of this, and that British exports to the EU as a percentage of its total exports had been falling rapidly since 1999.
In 2016 Patrick Minford predicted that a 'Britain Alone' scenario in which Britain left the EU, traded with the EU only on WTO terms, and unilaterally removed all tariffs, would result in a gain of 4% of GDP relative to where it would otherwise have been had the UK remained in the EU. Thomas Sampson, Swati Dhingra, Gianmarco Ottaviano and John Van Reenen of the Centre for Economic Performance criticised this analysis as being based on outdated information and analytical models, and unjustified assumptions.[22]
A report prepared by the Central Bank of Ireland in August 2019 indicated that the City of London would be "largely unaffected" by a hard Brexit, even if it were to have an "adverse" impact on the rest of the country. The report said that the City's financial services industry was sufficiently strong to withstand the impact of a no-deal Brexit and would remain "rich".[23]
Freedom of movement[edit]
Under the EU Single Market, freedom of movement allowed EU citizens to travel, live and work in any other member state. This freedom would have been curtailed by a no-deal Brexit, but in early September 2019 it became clear that Home Secretary Priti Patel would announce a liberalisation of rules such that in the event of a no-deal Brexit EU citizens arriving and joining the Settlement Register by the end of 2020 would be able to remain in the UK until 31 December 2023.[24]
Motor industry[edit]
On 28 July 2019, Groupe PSA (owners of Vauxhall Motors) told the Financial Times that a no-deal Brexit could, if Brexit makes it unprofitable, result in the closure of its Ellesmere Port plant,[27] with serious consequential impact on local suppliers.[28]
Sheep farming[edit]
On 30 July 2019, Helen Roberts of the National Sheep Association in Wales told The Guardian that it would be "absolutely catastrophic" to leave with no-deal and could lead to civil unrest among sheep farmers. Minette Batters, the president of the National Farmers Union, said there would be no market for 40% of the UK's lamb meat in the event of a no-deal Brexit. The Guardian also reported research commissioned by the Agriculture and Horticulture Development Board and Quality Meat Scotland that found that combined beef and sheep meat exports to the EU could have declined by 92.5%, with the lamb export trade "almost completely wiped out".[29]
Reports emerged of no deal plans by the UK government to purchase beef, lamb and some crops with £500 million having been budgeted for this.[30]
World-wide trade winners and losers[edit]
The UK would have been able to make new international free trade deals straight away following a no-deal Brexit.[31]
Delivering a research study on the impact on worldwide exports to the UK, the director of international trade and commodities at UNCTAD considered that "Brexit is not only a regional affair. Once the UK has left [the EU], it will alter the ability of non-EU countries to export to the UK market".[32]
According to UNCTAD a no-deal Brexit could have impacted third world countries, including in Africa.[33][32] However, a no-deal Brexit could have provided gains to China.[32] A no-deal Brexit could on one hand reduce EU exports to the UK by $34 billion and from Turkey by $2 billion, and on the other could increase Chinese exports by $10 billion and US exports by $5 billion.[32]
A no-deal Brexit would have had immediate repercussions for many developing countries’ exports, with the UNCTAD research raising the possibility of significant disruption and economic harm for developing countries whose exports are highly reliant on the UK market and/or were then beneficiaries of EU preferences.[32]
Member states preparedness[edit]
France[edit]
France considered that a no deal Brexit (sortie sèche in French) would occur because a withdrawal agreement had not been ratified.
Accordingly, 200 measures were considered, including the possibility for the government to make and unmake laws by ordonnance (roughly equivalent to a statutory instrument).[98][99]
The rights of British citizens living in France are ruled by an ordonnance dated 6 February 2019 and by décrets (decrees) dated 2 and 3 April 2019.[99] This included a 12-month period, assuming reciprocity, to allow British nationals to continue to live in France without titre de séjour. After that, they must have had a carte de résident (10-year residence permit) if they had lived in France for more than five years, otherwise one of the titres.[99]
Border controls would have been made possible through an ordonnance and a décret of 23 January 2019 and an ordonnance of 27 March 2019 to establish border checks.[99]
An ordonnance of 30 January 2019 allowed the movement of defence goods between France and the United Kingdom to continue.[99]
Greece[edit]
In July, Greece understood that "Boris Johnson's election as PM of the United Kingdom creates the conditions for a disorderly Brexit". For this reason, according to Varvitsiotis, Greece wanted to fix the "list of hundreds of pending issues that we must look at, because if they are not covered by an overall EU–UK agreement, all these agreements must be drawn up on a bilateral, national level." He wanted for all actions to respect both the "relations we have but also the relations that we will build from here on."[100]
Republic of Ireland[edit]
The economies of both parts of Ireland were expected to be seriously affected by a no-deal Brexit.[25][26] The EU planned to ensure that the economy of the Republic of Ireland was supported through the crisis with "a huge aid package" from the contingency fund.[101] On 22 July 2019, an EU diplomat told The Times that the bloc would "spend whatever was necessary" to support the Irish government through any disruption of trade.[101] According to the then British Brexit Secretary, Steve Barclay, 40% of the Republic's tangibles trade with continental Europe went via Dover/Calais, which (in a no-deal scenario) was expected to be seriously disrupted.[101]
Eamonn O’Reilly, CEO of Dublin Port, was quoted on 21 March 2019 as indicating the port was "as ready as we can be" for a No-deal Brexit with 8 hectares (20 acres) allocated for the eventuality.[102]
Poland[edit]
Poland planned a draft law to offer Britons living in Poland a delay from no deal Brexit at midnight on 29–30 March in 2019, until 30 March 2020, to protect their rights by obtaining a temporary residence permit or permanent residence in Poland. Theresa May said: "Almost 1 million Poles make their lives in Britain. That is why securing the rights of Polish and other EU citizens was my priority in the Brexit negotiations.".[97]
The card would have been different from a normal residency permit, being a "Brexit" card.[97]
Other countries' positions on no-deal Brexit[edit]
United States[edit]
A no-deal Brexit was strongly supported by the Trump Administration.[108] U.S. national security adviser John R. Bolton told British Prime Minister Boris Johnson that President Trump wanted to see a successful British exit from the European Union.[109] A no-deal Brexit might also have offered a possible switch of British alignment to US rules rather than EU rules.[110]
However, Speaker of the House of Representatives Nancy Pelosi (leader of the Democratic Congressional majority) said that the House will refuse to ratify any US/UK free trade agreement if the stability of the Good Friday Agreement was imperilled.[111]
Alexandra Hall Hall, the Brexit Counsellor at the British Embassy in Washington, D.C., resigned because she felt she was asked to "peddle half-truths on behalf of a government I do not trust". Hall Hall stated, "I have been increasingly dismayed by the way in which our political leaders have tried to deliver Brexit, with reluctance to address honestly, even with our own citizens, the challenges and trade-offs which Brexit involves; the use of misleading or disingenuous arguments about the implications of the various options before us; and some behaviour towards our institutions, which, were it happening in another country, we would almost certainly as diplomats have received instructions to register our concern."[112]
Subsequent EU/UK free trade agreement negotiations[edit]
It is generally assumed that the UK and EU would have wished to negotiate a free-trade agreement. Dominic Raab, the British Foreign Secretary and First Secretary of State, believed that the UK would be better able to negotiate an FTA with the EU after a no-deal Brexit.[113] However the Institute for Government disagreed, pointing out that negotiations in that case would not be under Article 50 terms but under the EU's "third countries" arrangements which "take place on a different legal basis with a more complicated process and ratification requirements – which is likely to involve ratification in all 27 member state parliaments".[114][115]