LONDON — When is a no-deal Brexit not a no-deal Brexit?
The answer, according to the long-awaited U.K. government no-deal papers: When the consequences are so disruptive that you immediately need to start talking to the other side about lots of mini deals to fill in the gaps.
In his biggest speech since taking the job six weeks ago, Brexit Secretary Dominic Raab set out Thursday to reassure citizens and businesses that the British government would be well prepared if the Brexit talks break down.
Ramping up no-deal preparations was a key concession to Cabinet Brexiteers during the July meeting at Prime Minister Theresa May’s Chequers country residence last month that produced her compromise Brexit plan.
Their logic is that U.K. negotiators can only play hardball if they can threaten to walk away from the talks. And the only way to do that convincingly is to have credible plans in place for no-deal.
But the first tranche of Raab’s no-deal papers that accompanied his speech succeeded in showing just how difficult and complicated it would be — as well as how much the U.K. would rely on goodwill from Brussels and the EU27 to avoid total chaos.
On two fundamental aspects of the U.K’s preparation for no-deal, financial services and the border between Northern Ireland and Ireland, the papers are clear — unilateral action by the U.K. can only go so far. That means “engagement” with the EU will be key if the Brexit talks break down. (In the case of the former, to prevent EU and British citizens being locked out of their British bank accounts and pension pots. And in the latter, to ensure that trade still flows freely across the highly sensitive Northern Irish border.)
In this convoluted, piece-meal scenario, some mini deals with Brussels may “not necessarily be legal arrangements,” said Raab, adding that they could also be with individual countries or regions or national institutions directly.
It was an admission that there is no such thing as a total no-deal from the U.K. point of view. “Is it really all or nothing?” asked one senior U.K. official. “So if we can’t agree everything, they won’t agree to anything? Is this really tenable?”
Labour MP Hilary Benn said that the papers confirmed that “no deal — far from being better than a bad deal — would be very damaging economically.”
Call my bluff
How bad would no-deal be? It depends on whom in government you ask.
Raab said it is “not what we want,” but added it would not be all bad, affording Britain some “countervailing opportunities” — such as the immediate end of payments into the EU budget, and the ability to set its own trade and immigration policies.
That glass-half-full take is not shared by Chancellor Philip Hammond. With thunder-stealing timing, the Treasury published a letter from the chancellor in which he noted the “large fiscal consequences” of no-deal (as set out in previously published analysis) amounting to a £80 billion a year increase in borrowing by 2033.
Of course, it may not get to that stage, and EU diplomats say they regard Thursday’s first tranche of 25 no-deal papers — covering health, energy, trade, financial services, farming, state aid, workplace rights and research — as part of an elaborate British bluff.
Rather than get to a point before March 2019 when no-deal looks like an impending certainty, one EU diplomat predicted the U.K. would “ask for an extension [to negotiations] and that this extension will last for the whole transition period.” That’s an idea that British ministers have consistently dismissed, insisting that the U.K. is leaving come what may on March 29 next year.
Extension or not, Raab insisted he does not expect the EU to be disruptive. “For our part, if the negotiations fail, we would continue to behave as a responsible European neighbor, partner and ally,” he said. “And that will extend to the necessary engagement with our EU friends when it comes to no-deal planning.” He said he expects the “same level of ambition and pragmatism” from the EU.
But as so often happens, that expectation could be derailed by the EU’s guiding star in this negotiation: the letter of the law.
“It’s not a matter of being vindictive, it’s just the law, once the U.K. leaves it is not an EU member and we have to behave accordingly,” said a second EU diplomat.
Why, for instance, should U.K. freight be waved through at Calais merely to avoid disruption? Legally speaking, shouldn’t the same treatment then be on the table for Turkey? These are the questions EU officials and diplomats are asking.
No deal? No way
For opposition MPs and businesses, the no-deal papers were an opportunity to point to the dangers inherent in the whole exercise.
Labour MP and chair of the House of Commons Brexit committee Hilary Benn said that the papers confirm that “no deal — far from being better than a bad deal — would be very damaging economically.”
The admissions of the costs to consumers and businesses made it hard for Raab to strike a reassuring tone in his speech. The price of credit and debit card transactions on European purchases (everything from imported goods to Airbnb bookings) would go up, his guidance on banking said.
Another paper on trade pointed out that businesses making customs declarations on goods entering the EU for the first time would have to hire a broker, get the right computer software and do a lot of paperwork, all of which will “come at a cost,” the document said, vaguely. One government official said there is particular concern about medium-sized businesses — big enough to have European contracts, but not big enough to be able to shoulder the administrative burden that the multinationals could absorb.
Business lobby group the Confederation of British Industry did not pull its punches on what Raab’s no-deal guidance has revealed.
“By now, few can be in any doubt that ‘no deal’ would wreak havoc on economies across Europe,” said the group’s deputy director general, Josh Hardie. “These papers show that those who claim crashing out of the EU on World Trade Organization rules is acceptable live in a world of fantasy.”
Tom McTague contributed reporting.