No vaccine for a no-deal Brexit

Sep 13, 2020

It is exactly one year ago this week that the British parliament voted to oblige the British government to release details of what was known as Operation Yellowhammer.

This was the name given to the preparation of a dossier of “reasonable” worst-case planning assumptions in the event of a no-deal Brexit. The Covid-19 pandemic has made this all feel very remote, but in terms of Brexit risk, the situation is now worse than it was this time last year.

It is hard to understand why the British government should have prejudiced the talks aimed at avoiding a no-deal Brexit by publishing its Internal Market Bill last week. This bill contains an admitted breach of the existing Withdrawal Agreement between the EU and Britain. Boris Johnson, the British prime minister, told the House of Commons that it was “a legal safety net to protect our country against extreme or irrational interpretations”.

However, such a safety net already exists in the Withdrawal Agreement. Article 16 of the Northern Ireland Protocol is titled “Safeguards”. This allows Britain to take “appropriate safeguards” unilaterally if it turns out that the protocol creates “serious economic, societal or environmental difficulties”. Maybe the British now think this safety net, to which they already agreed, is too thin.

With all the efforts on both sides in the past year, which finally led to a ratified withdrawal agreement, Britain sundering its political ties with the EU, and a political declaration to form the basis of talks on a future arrangement, why are we still in this mess? There are real consequences for businesses and citizens alike if the current nonsense results in a no-deal Brexit.

Without a deal, many consumer goods coming in from Britain will be more expensive in the shops after January 1, 2021. Animal products and dairy products produced in Britain will be subject to additional tariffs here which will increase their price on the shelves by anything up to 40 per cent. Some traders have, in the past, absorbed price fluctuations because of tax increases, but the tariff increases on imported goods would be too high for many traders to absorb.

Consequently, British foodstuffs will become scarcer and more expensive on supermarket shelves. Clothes will similarly be affected, with an additional tariff, typically 12 per cent, added to the price of clothing imported from Britain. More consumers have been shopping online because of the restrictions imposed by the pandemic, but buying online won’t protect consumers from this price rise either.

The only saving grace for consumer prices might be a devaluation of sterling against the euro. Sterling dropped against the euro when Britain’s decision to leave the EU was taken and could fall further in the event of a no-deal Brexit.

A sterling devaluation is not good news for Irish exporters though. On top of that, goods crossing borders will be subject not only to additional tariffs, but to quality checks. All the additional paperwork and checking will lead to delays. Businesses importing or selling into Britain, or trading with the EU via Britain, won’t have their goods delivered as quickly.

Compounding this problem for Ireland is the fact that every other EU country which exports to Britain will have a similar experience. It will not be possible for any exporter in the EU to deal easily with Britain. For instance, French food producers whose products traditionally were exported to Britain will have to look for other markets too. There will be more competition within the EU itself post Brexit.

Trade in services is not as heavily bound by EU norms and standards as trade in goods. As a general rule, the more highly regulated the profession, the greater the obstacles will be for Irish people practising in Britain and vice versa.

The legal and financial services industries will find their scope for cross-border practice to be particularly at risk without a Brexit deal. The best that can be said about the impact of Brexit on travel and transport is that it will perpetuate many of the restrictions already forced on us by Covid-19.

The Yellowhammer dossier identified problems with freight flow and traffic management, with the cross-border energy market, with customs checking, with the availability and distribution of medicines, and with security and law enforcement.

All these issues are firmly back on the agenda, despite so many politicians and technocrats working to avoid them.

A no-deal Brexit is no longer an abstract possibility. It will be as disruptive to many livelihoods as the coronavirus and without the prospect of a vaccine. Whichever side is ultimately at fault will have perpetrated a significant injustice on British and European citizens.

The only chink of light is that we have been to the brink with Brexit on so many occasions since the June 2016 decision and trouble has been avoided at the last moment. Will the people in the negotiating rooms be able to get around these latest self-inflicted problems?

Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland.