Response to possibility of 'no deal' scenario

Summary: 

A ‘no deal’ scenario, in which the UK simply leaves the Single Market and Customs Union in 2019, does not have to be the ‘catastrophe’ that many fear. There would be some new barriers to trade with the EU, but these should be manageable.  On the upside, the UK would be able to crack on with its own trade deals with the rest of the world, cut tariffs on imports unilaterally, review EU regulations, and save straightaway on contributions to the EU budget.

The biggest risks may be in areas such as financial services and aviation, which are not covered by WTO rules. But the UK and the EU could simply agree to continue the current arrangements here separately from the Article 50 process. It may well be better to have a short transition to smooth all this out, followed swiftly by a comprehensive free trade deal. Nonetheless, a clean break in 2019 could still be the next best outcome.

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Julian Jessop is Chief Economist at the IEA. He has thirty years of experience as a professional economist in the public and private sectors, including senior positions at HM Treasury, HSBC and Standard Chartered Bank. Prior to joining the IEA in March he was a Director and Chief Global Economist at the leading independent consultancy, Capital Economics. Julian has a First Class degree in economics from Cambridge University and post-graduate qualifications in both economics and law.