Government and Institutions

How about a ‘No Deal Plus’ Brexit?

Discussions about the prospect of ‘no deal’ in the Brexit negotiations frequently generate more heat than light. Often this is because the participants aren’t talking about the same thing. We need more clarity in the terms being used here, and ‘no deal plus’ could be the answer.

The language is important. Some people interpret ‘no deal’ to mean an outcome where the UK leaves the EU without any agreement on a wide range of issues, from aviation to medical isotopes and many other vital areas. This the basis of the ‘chaotic’ or ‘cliff-edge’ Brexit feared by many, including some senior lawyers and academics. However, no-one is seriously arguing that this outcome would be desirable, nor, I will argue, is it remotely likely. In reality, it is a straw man.

An alternative vision of ‘no deal’ would involve quitting the Single Market and Customs Union in 2019, but still allow for ongoing cooperation in areas which do not require EU membership. This was the idea behind a recent IEA Brexit Unit briefing on the implications of leaving with ‘no deal’.

In short, the briefing argued that the additional barriers to trade with the EU as a result of quitting the Single Market and Customs Union would not be as large as many fear, and that the UK would be able to start to reap the benefits of Brexit straightaway. The briefing also noted some of the areas where a new agreement would still be desirable, or even essential. But it concluded that these agreements could be made separately, and in time.

This scenario would be consistent with what a few commentators are already starting to call ‘no deal plus’. Some have suggested ‘no trade deal’ as a variant, although this is unsatisfactory because it appears to exclude any agreement in trade-related areas. Others have talked of a ‘WTO deal’. This is also unsatisfactory, because many important areas, particularly in services, are not covered by WTO rules. And ‘no deal plus’ can become a shorthand with more substance than either ‘clean Brexit’ or ‘hard Brexit’.

To be clear, the practical obstacles to implementing ‘no deal plus’ in time for 2019 would be substantial. Many commentators, such as the Institute of Government, have drawn attention to these hurdles, which cannot be dismissed lightly.

In my view, this underlines the case for some form of transitional arrangements. A two-year period after March 2019, as suggested by the Prime Minister in her Florence speech, would give the UK and the EU nearly three and half years from now to work out the details. What’s more, moving to a comprehensive free trade deal with the EU at the end of this period would be preferable to relying on WTO rules alone. Measured against this alternative, ‘no deal plus’ is relatively risky and surely second best.

However, the ‘no deal plus’ option is not as unrealistic as some Remainers would have us believe. There are four key points.

Note first that the UK and EU would not be starting from scratch. For example, it is often said that it takes the EU many years to conclude an agreement with a third country even on relatively straightforward issues, such as landing rights or mutual recognition of regulations. But in most cases here it would simply be a question of agreeing that the existing arrangements are satisfactory and that they should be continued, with whatever technical tweaks are necessary following Brexit.

Second, the EU already cooperates closely with many countries that are not even in Europe. Just look at the overseas participants in programmes like Euratom or the wide variety of airlines from all over the world that somehow manage to fly to Paris or Frankfurt. Crucially, these arrangements are not dependent on EU membership.

Third, both sides will have a strong vested interest in making this all work. As it happens, Article 8 of the EU Treaty actually requires the Union to “develop a special relationship with neighbouring countries” and encourages it to “conclude specific agreements with the countries concerned […] which may contain reciprocal rights and obligations as well as the possibility of undertaking activities jointly”. But whatever the legal position, it is hard to see why the UK and the EU would not want to minimise disruption.

Take the concerns over medical isotopes. Realistically the UK will have to rely on supplies from Belgium, France and the Netherlands for the foreseeable future. In principle, Euratom could block this trade once the UK leaves the EU. But does anyone believe for a single moment that this would actually happen? Similarly, would EU politicians be willing to forego the rights of their airlines to fly to the UK as some sort of punishment for Brexit?

Fourth, there are some crucial areas where a formal deal may not actually be necessary. In particular, the UK could simply implement its proposals on citizens’ rights unilaterally. This would put the onus on the EU to reciprocate, but why on earth wouldn’t they? Again, what would the alternative say about our European partners?

Fortunately, this whole debate is likely to be hypothetical. The EU has signaled that it is ready to start preparatory work on the future relationship with the UK, including a road map towards a comprehensive trade deal, once more progress is made on citizens’ rights, the Irish border and the financial settlement. This should allow the talks to move on the next phase by the end of this year, which is arguably the latest that this work needs to begin if a good deal is to be done.

Nonetheless, the option of ‘no deal plus’ should remain in play. It may well be a second best, but it would be wrong to rule it out completely.


Julian Jessop is an independent economist with over thirty years of experience gained in the public sector, City and consultancy, including senior positions at HM Treasury, HSBC, Standard Chartered Bank and Capital Economics. He was Chief Economist and Head of the Brexit Unit at the IEA until December 2018 and continues to support our work, especially schools outreach, on a pro bono basis.

1 thought on “How about a ‘No Deal Plus’ Brexit?”

  1. Posted 25/10/2017 at 17:19 | Permalink

    I strongly agree that “no deal plus” is a more sensible way of thinking about the world, to me that has a few implications
    1. businesses appear to be lobbying on what they want in a deal (transitional or permanent), more useful would be to lobby on what the UK can unilaterally do to change its laws
    2. on the implementation issues of moving to a new regime, the UK should really focus on simple rules and that will make the implementation less likely to go wrong. [Which would also be great in reducing the cost of doing business]
    3. An explicit recognition in the legislation of the tradeoff in mistakes. e.g. on citizenship for EU nationals who are here, the mistake of giving someone citizenship they don’t qualify for is very different to the mistake of denying them. A quicker cheaper process with a higher error rate is also often a better choice than a slower, costly more accurate process. This has to be written into the law given civil servants much prefer to make the 2nd mistake to the 1st. There has been some recognition of this in the head of customs giving evidence and saying it is better to have some goods imported from europe without the right paperwork, than to have huge queues and delays on imports.

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