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No-deal Brexit would leave households almost £1,000 worse off, new report suggests

Households will face higher prices as they absorb costs from labour changes, tariffs, and red tape, it says

Saturday 21 July 2018 23:37 BST

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(PA)

Leaving the European Union (EU) without a trade deal could leave British households almost £1,000 worse off a year, according to a new report.

If Britain left the bloc and reverted back to World Trade Organisation (WTO) rules, there would be import tariffs and the UK would leave the EU Customs Union and the Single Market.

As a result each household is likely to be £960 worse off, the report by multi-national consulting firm Oliver Wyman has suggested.

However, the exact size of the annual impact would vary between £245 and that amount, depending on the type of trade deal the UK gets and whether it can avoid EU tariffs,

Households will face higher prices as they absorb costs from labour changes, tariffs, and red tape, it said, whilst consumer businesses could see profits slump by one to four per cent.

A report by the House of Lords European Union Committee said food prices are likely to rise after Brexit if no trade agreement with the EU is reached and that there could be shortages of some products.

The news comes as Brexiteer Andrea Leadsom admitted that quitting without an agreement would not be an "optimal solution".

She told The House magazine: "The EU has simply not taken us seriously so far in terms of the future agreement. What this deal does is it says to them, 'right, now we can have a free trading area where there won't be the need for border checks and controls'.

The biggest issues facing UK on leaving EU

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1/8The biggest issues facing UK on leaving EU

The biggest issues facing UK on leaving EU

Post-Brexit immigration

workers sorting radishes on a production line at a farm in Norfolk. One possible post-Brexit immigration scheme could struggle to channel workers towards less attractive roles - while another may heighten the risk of labour exploitation, a new report warns.

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The biggest issues facing UK on leaving EU

Customs union

A key point in the negotiations remains Britain's access to, or withdrawal from, the EU customs union. Since the referendum there has been hot debate over the meaning of Brexit: would it entail a full withdrawal from the existing agreement, known as hard Brexit, or the soft version in which we would remain part of a common customs area for most goods, as Turkey does? No 10 has so far insisted that “Brexit means Brexit” and that Britain will be leaving the customs union, but may be inclined to change its position once the potential risks to the UK’s economic outlook become clearer.

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The biggest issues facing UK on leaving EU

Northern Ireland-Irish border

Though progress was made last year, there has still been no solid agreement on whether there should be a hard border between Northern Ireland and the Republic of Ireland. To ensure borderless travel on the island, the countries must be in regulatory alignment and therefore adhere to the same rules as the customs union. In December, the Conservative Party’s coalition partners, the DUP, refused a draft agreement that would place the UK/EU border in the Irish Sea due to its potential to undermine the union. May has promised that would not be the case and has suggested that a “specific solution” would need to be found.

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The biggest issues facing UK on leaving EU

Transition period

Despite protests from a small number of Conservative MPs, the Government and the EU are largely in agreement that a transitional period is needed after Brexit. The talks, however, have reached an impasse. Though May has agreed that the UK will continue to contribute to the EU budget until 2021, the PM wants to be able to select which laws made during this time the UK will have to adhere to. Chief negotiator Michel Barnier has said the UK must adopt all of the laws passed during the transition, without any input from British ministers or MEPs.

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The biggest issues facing UK on leaving EU

Rights of EU citizens living the UK

The Prime Minister has promised EU citizens already living in the UK the right to live and work here after Brexit, but the rights of those who arrive after Brexit day remains unclear. May insists that those who arrive during the transition period should not be allowed to stay, whereas the EU believe the cut-off point should be later.

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The biggest issues facing UK on leaving EU

Future trade agreement (with the EU)

Despite this being a key issue in negotiations, the Government has yet to lay out exactly what it wants from a trade deal with the EU. Infighting within the Cabinet has prevented a solid position from being reached, with some MPs content that "no deal is better than a bad deal" while others rally behind single market access. The EU has already confirmed that access to the single market would be impossible without the UK remaining in the customs union.

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The biggest issues facing UK on leaving EU

Future trade agreements (internationally)

The Government has already begun trying to woo foreign leaders into prospective trade agreements, with various high profile state visits to China, India and Canada for May, and the now infamous invitation to US President Donald Trump to visit London. However the UK cannot make trade agreements with another country while it is still a member of the EU, and the potential loss of trade with the world's major powers is a source of anxiety for the PM. The EU has said the UK cannot secure trade deals during the transition period.

EPA

The biggest issues facing UK on leaving EU

Financial services

Banks in the UK will be hit hard regardless of the Brexit outcome. The EU has refused to give British banks passporting rights to trade within the EU, dashing hopes of a special City deal. However according to new reports Germany has suggested allowing trade on the condition that the UK continues paying into the EU budget even after the transition period.

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"It's saying to the EU, 'you better take this seriously'. In my view, it's take this seriously or we are heading for no deal. The message to the EU has to be, 'this is the final offer'.

"So, when you say, 'is it flexible?', it's not in the sense of they're going to wriggle away at it and we're going to accept it. It is a very hard and fast offer to the EU that makes sense for them. But if they don't accept it, we're also ramping up our no deal preparations. That's where we will be heading and they will have forced us to do that.

She added: "My message to the EU is, 'take this seriously because otherwise, you're forcing us down the road of no deal'."

Agencies contributed to the report

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