Theresa May and several of her ministers have claimed that no Brexit deal would be better than a poor deal. They are wrong. The costs to the UK economy of failing to strike a deal would dwarf those of signing up to a bad deal.
The likelihood that the Brexit negotiations break down irrevocably and Britain leaves the EU with no deal is slim but certainly not zero. The British government could balk at paying the bill for EU budget commitments (the 27’s recent demands have been costed at up to €100 billion, gross). The two sides could fail to reach agreement over their respective citizens’ rights. Or the UK might refuse to accept a transition deal that includes continued free movement and the jurisdiction of the European Court of Justice.
Were the UK to leave without a deal of any kind, EU tariffs would immediately be payable on imports from Britain. These average about 4 per cent, but vary hugely. British food exporters would face average tariffs of 14 per cent. British car exports, which have grown more rapidly than any other category of manufactured goods exports over the last ten years, would face a 10 per cent tariff. The UK would also have to impose tariffs on its imports from the EU: it would only be allowed to reduce tariffs to zero – as some eurosceptics have proposed – if it did so for all countries, not just the EU.
To read the full Centre for European Reform report click here.