How a no-deal Brexit could cripple Britain | Digital Asia
Digital Asia News Update
- Neil Hall / Reuters; Yves Herman / Reuters; Samantha Lee / Business Insider
LONDON – As the UK edges dangerously close towards leaving the EU without an agreement, the once-unthinkable prospect of a no-deal Brexit has become an increasingly realistic one.
On Thursday, the UK government published its final batch of no-deal technical notices, which advised businesses and consumers on how to prepare for leaving the EU empty-handed.
So here are just some of the other things that could happen if May fails to secure a Brexit deal.
The NHS could run out of drugs
- Christopher Furlong/Getty Images
Most people take the day-to-day functioning of the NHS for granted. But the flow of medical supplies – cancer medicines, vaccines, clinical devices, and blood – are dependent on complex supply chains across Europe which are designed to be traded within the single market.
In a leaked letter between NHS chiefs in July, Simon Stevens, chief executive of NHS England, warned: “Public health and disease control coordination could also suffer, and our efforts to reassure, retain and attract the European workforce on which the NHS relies could also be jeopardized.”
Around 45 million packs of medicine go from the UK to Europe every month and 37 million packs travel in the opposite direction. Every single one of those needs to be licensed and tested and certified by the European medicines regulator.
At the moment, a test in the UK is valid in the EU and a test in the EU is valid in the UK. If the UK left without a deal, that would cease to be the case, according to the Brexit Health Alliance.
Licenses held by a UK company to sell medicines in the EU would become void overnight, meaning that 361 products (37% of the market) could not be sold in Europe. Many of those are life-saving drugs.
Conversely, where licenses were held in the EU, there would likely be the disruption of their supply in the UK. That means the UK would be forced to find an arrangement for the 978 medicines sold across the country which were issued under EU rules.
What is the government’s plan? Well, the government has announced that it would simply accept the testing of medicines if they’re carried out by a member state.
As for UK medicines heading to the EU, the government would merely hope the EU offered the same deal in return. Health experts are not reassured.
Customs checks could delay treatment of critical injuries
- Thomson Reuters
Customs checks at borders would also pose a huge problem for the care and treatment of people critically injured during emergencies.
Accident and emergency trauma packs – which are full of equipment and medicines – are often flown into the UK within hours of being ordered.
During times of large-scale emergencies, such as terrorist attacks, the short time frame is especially necessary because a large number of people are suddenly injured.
Hospitals tend not to stockpile these supplies because they have a short shelf-life. Doing so would mean many packs were wasted at great expense.
Under a no-deal scenario, customs checks between the UK and EU would increase dramatically because the UK would be a third country with no arrangement in place to ease the flow of goods. The prospect of having to wait even a few extra hours for such supplies could be a matter of life and death.
Health secretary Matt Hancock this week said he was planning to “switch supply from land to air” for short-life medicines. But that would likely depend on a scrambled aviation agreement with the EU, which would require… a deal.
Border chaos & spiralling costs for businesses
- Matt Cardy/Getty Images
The no-deal notices published by the government reveal the extraordinary level of costs and bureaucracy that such a scenario would entail, as well as the chaos it would mean for Britain’s borders.
If there was no deal Britain would revert to “third country” status, and the government has detailed a long list of extra checks that firms exporting and importing to and from the EU would face.
Businesses would need to make customs declarations, pay tariffs on both imports and exports, and invest in expensive new computer systems to track goods.
“If the UK left the EU on 29 March 2019 without a deal, there would be immediate changes to the procedures that apply to businesses trading with the EU. It would mean that the free circulation of goods between the UK and EU would cease,” the government said.
Extra procedures are both timely and very expensive for businesses. Many British firms which export or import goods have warned that they would cease to operate very quickly under such a scenario.
There would be huge queues as British trucks are barred from entering Europe
- Reuters / Neil Hall
British lorries would also be barred from entering Europe under a no-deal Brexit, according to an industry chief who spoke to Business Insider.
James Hookham, deputy chief executive of the Freight Transport Association (FTA), told BI that a no deal Brexit would see Britain revert to an old set of international arrangements which handed it just 103 permits to cover the 300,000 journeys made by British trucks make to Europe every year.
That would, in essence, mean the bulk of Britain’s lorry fleet was blocked from entering Europe the day after Brexit in March next year, should May fail to secure the transitional deal which is still being negotiated. This would affect hundreds if not thousands of businesses with EU customers.
That, in turn, would spell chaos at Britain’s ports, which are unprepared for such an outcome. Dover does not currently hold the necessary capacity to hold the lorries queueing to move across the border, meaning miles-long tailbacks on motorways leading to the port were inevitable.
The government is reportedly considering a plan to turn a 13-mile stretch of the M26 in Kent into a lorry park in order to cope with those tailbacks. Officials are reportedly considering turning the road into a “holding area” for up to 1,400 goods vehicles to try and ease the gridlock as 10,000 lorries a day suddenly required customs checks to enter France.
Shelves would start to empty
- Reuters / Dylan Martinez
Ministers have reportedly drawn up secret plans to stockpile processed food and medicine more widely to prepare for inevitable shortages under a no deal scenario.
More than 97% of the £22 billion worth of processed food and drinks imported into the UK every year come from the EU, and the industry supports 400,000 jobs.
Indeed, firms have already started stockpiling food, according to Gavin Darby, chief executive of Premier Foods, and president of the Food and Drink Federation, the industry group. He told the FT that “smart companies will have worked out where the pinch points are with ingredients and will be building up inventory,” but refused to say what plans Premier Foods itself had made.
On Tuesday, Brexit Secretary Dominic Raab dismissed such reports as “hair-raising scare stories.”
Credit card costs would increase
- Joe Raedle/Getty Images
The government’s first batch of no-deal Brexit notices in August warned that British shoppers would face higher credit card costs.
A document on banking, insurance, and other services said: “The cost of card payments between the UK and EU will likely increase, and these cross-border payments will no longer be covered by the surcharging ban.”
EU rules mean it is illegal for retailers to charge extra fees when someone uses a certain credit or debit card. Those rules would end if the UK left without a deal. The total extra cost to consumers could be around £166 million per year, according to estimates.
Long-haul flights would be barred from taking off
- London Heathrow Airport
Under a no deal Brexit, UK airlines would cease to be considered EU airlines, meaning they would lose the flying rights necessary to operate across Europe.
Aviation consultant Andrew Charlton told BI that flights between the UK and most European countries would likely continue under a no deal Brexit because most airlines could revert back to pre-EU flying agreements.
As for flights to the rest of the world, however, there would likely be widespread disruption and chaos.
Take the example of the United States. Flights between the UK and US are currently governed by an EU-level agreement. Should that end, the UK would likely revert to last UK-US aviation agreement, called Bermuda 2.
That, says aviation consultant Andrew Charlton, is an “exceptionally restrictive, exceptionally nasty” air traffic agreement which is “generally considered to be one of the greatest crimes in the history of aviation.”
It is extremely limited and would be “massively disruptive,” Charlton said, and would ground most flights from the UK to the US. Flights between other major countries outside Europe would likely be similarly impacted in the short-term, too.
The City of London would suffer a ‘huge financial stability risk’
- Reuters / Eddie Keogh
The financial services sector is making urgent contingency plans for a no deal Brexit, but that might not be enough to prevent very damaging consequences for firms and ordinary consumers.
The biggest risks relate to cross-border contracts, which cover financial arrangements between firms and consumers across the EU.
Failure to ensure so-called “contract continuity” would mean that hundreds of thousands of financial contracts which affect ordinary people – insurance policies and pensions, for example – could be rendered void overnight. It is a huge issue.
The government’s own advice admitted. A no-deal Brexit could mean:
• Valid insurance claims in the UK were not paid;
• Pensions could not legally be paid;
• Derivatives contracts – a crucial means of hedging financial risk – could become invalid and be unpaid.
The size of some of those contracts, as well as the important role of derivatives contracts in providing financial stability, means disruptions to contract continuity carry “the potential for huge financial stability risk,” according to Kerstin Matthias, head of policy at TheCityUK.
“It’s a very serious problem,” she told BI.
“Industry is doing what it can to ensure that, regardless of any political or regulatory agreement, they can service their existing customers and clients. But it is a huge task to transfer all these existing contracts to a new entity.”
“There’s simply a sequencing and timing issue where [firms] won’t be able to transfer all these contracts by March next year,” she added.
The future of EU citizens living in the UK would be in doubt
The UK could decide to unilaterally guarantee the rights of EU citizens living in the UK, and reports this week suggested the UK government would, offering EU migrants the right to continue living in the UK and continue accessing the NHS and claiming benefits even if such rights were not guaranteed in return.
However, this would be a huge administrative task for an already over-burdened civil service, and would likely take months to process. Plus, the Home Office’s unimpressive record of tracking citizens – evidenced in the Windrush scandal – will raise questions of whether the department would be equipped to register 3.8 million EU citizens in a no-deal scenario.
There would be a ‘catastrophic’ impact on manufacturing
- Bill Pugliano/Getty Images
Manufacturing accounts for approximately 10% of UK GDP. It is a highly significant sector which often represents an important source of employment in poorer regions of the UK.
UK manufacturers say a no deal Brexit would spell disaster for the industry, wiping out many smaller firms and pushing larger firms abroad.
Many of their European supply chains are based on parts moving freely and quickly across the single market – “just in time” supply chains – and delays would mean they were forced to stockpile huge amounts of products for which the storage capacity does not exist.
Many firms would go out of business almost immediately.
Airbus, the UK firm which makes aircraft, issued perhaps the starkest warning from a listed manufacturer when it said that time left to avert “catastrophic” consequences was running out.
“If there is a no deal Brexit, it will be catastrophic for this country, and catastrophic for Airbus and our supply chain,” Airbus’ senior vice president Katherine Bennette told Reuters.
Airbus joined BMW and other major firms in warning they would move thousands of jobs out of the UK to elsewhere in the EU should a no-deal Brexit become a reality.