‘Profound antagonism’ will follow ‘no deal’ on post-Brexit trade, thinktank warns

The UK is still ill-prepared for the end of the post-Brexit transition period, with or without a new trade deal being agreed, according to a report published on Saturday (19 December) by UK lawmakers. EPA-EFE/WILL OLIVER

The collapse of trade talks this year will lead to “a period of profound antagonism” between the EU and UK, the director of the UK in a Changing Europe academic think tank, has warned.

At the launch of a report on the implications of a ‘no deal’ scenario on Tuesday (23 September), Professor Anand Menon said that “that will make future co-operation very difficult indeed”.

The report warns that the “most immediate and visible impact of the UK failing to get a deal with the EU will be seen at the border, with risks of queues and shortages of food”.

It also said that the Internal Market Bill, recently introduced in the UK Parliament by Boris Johnson’s government, is likely to make a ‘no deal’ outcome “considerably more problematic” in Northern Ireland.

The prospects of future UK-EU trade being conducted on World Trade Organisation terms, involving hefty tariffs and quotas on a wide range of goods and services, has dramatically increased following the row over the Internal Market Bill.

The bill was designed to govern trade within the UK, which would break the terms of the Withdrawal Agreement that took the UK out of the EU in January.

The European Commission has demanded that the bill be withdrawn before the end of September, while European Parliament leaders said the Parliament would not ratify any agreement between the EU and the UK if the Withdrawal Agreement is breached.

The bill is set to be passed by UK lawmakers in the House of Commons this week and be debated by the House of Lords next week.

Prior to the UK’s threat to break the Withdrawal Agreement, the two sides had been deadlocked, primarily over state aid and fisheries.

Following the eighth round of talks in London last week, UK negotiators conceded that little progress had been made, complaining that “the EU position cuts across UK sovereignty in a number of important areas, most notably on subsidy control.”

Westminster analysts see the Internal Market Bill as an attempt to push the EU’s negotiating team, led by Michel Barnier, to offer further concessions, in a bid to finalise a trade pact that could be signed off at an EU summit in mid-October. Instead, it appears to have hardened the EU’s resolve.

Both officials and businesses have ramped up their preparations for a ‘no deal’ scenario in recent weeks.

In one recent warning sign, thousands of Britons living in the EU have been told by their banks that they will have their UK accounts closed by the end of the year because of the UK’s failure to agree a post-Brexit trade deal.

The EU, meanwhile, is expected to base its economic forecasts for the bloc on the assumption that the deal with the UK will not be finalised this year.

State aid has become an unlikely source of dispute given that successive UK governments have shown little inclination to intervene in markets and prop up companies. That attitude appears to have changed under Johnson’s government.

The EU, meanwhile, is expected to base its economic forecasts for the bloc on the assumption that an EU-UK trade deal will not be finalised this year.

“While the prime minister said no deal is a ‘good outcome’ our report shows that it may lead to significant disruption and will have a significant negative economic impact,” said Professor Menon.

The thinktank warns that continuing impacts of COVID-19 may mitigate or obscure – politically or economically – the impact of no deal. But it adds that the government’s own analysis forecasts that a no-deal Brexit would reduce UK GDP by 7.6% over 15 years, a much higher impact than the long-term economic consequences of COVID-19.

[Edited by Zoran Radosavljevic]

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