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Society, Politics & Law

What happened to ‘no deal is better than a bad deal’?

Updated Tuesday 27th November 2018

Negotiations are considered a fine art and Alan Shipman looks at the blunders made trying to secure a deal for Brexit with the EU.

The idea that “no deal is better than a bad deal” was central to the UK’s bargaining strategy with the EU, over its Withdrawal Agreement and subsequent terms of re-engagement. It made clear to EU negotiators that the UK could afford to walk away from talks, and still prosper under the default terms offered by World Trade Organisation (WTO) membership. If the EU wanted a deal, it would therefore have to offer the UK better terms than were available under WTO rules.

As a bargaining stance, the claim seemed to be reinforced by calculations of the impact of No Deal on the respective sides. Most economic assessments suggested that both the EU and the UK would lose, compared to the current situation (UK membership) and an ongoing relationship on the Norwegian, Swiss or even Canadian model.

Many suggested that the UK would suffer more than the EU-27, because it currently sends a greater proportion of its exports to the EU than the proportion of EU exports that it absorbs, and has just-in-time supply chains mainly running through the EU. But the EU had to respect the interests of its individual members, the most exposed of which – Ireland – stood to lose far more from a No Deal than the UK.

Creative commons image Icon Tiocfaidh ár lá 1916 on Flickr under Creative Commons BY-ND 4.0 license Theresa May and Jean Claude Juncker, President of the European Commission.

In keeping with Brussels’ assurances that Brussels wanted to reach a mutually favourable deal, few EU member-states (apart from the Netherlands) prepared systematically for a No-Deal Brexit. This lack of preparedness strengthened the UK’s hand in seeking a good deal, by amplifying the damage it could inflict on ex-partners by rejecting all the deals it didn’t like.

Brexit was pitched to UK referendum voters as a route to economic gain, the EU approached negotiation with a broader agenda. It wanted to show that member states could not leave without losing the benefits of membership.

No-No Deal

So why, as 2018 drew to a close, did Theresa May’s negotiators settle for a deal that upset many Brexiters with its timidity, without assuaging Remainers - rather than committing to No Deal, and being able to wring a last-minute Good Deal from those trembling Eurocratic hands?

Blame seems to have been heaped in four directions:

  • Half-hearted negotiators

The Euro-sceptic suspicion is that the politician and civil servants in charge of the UK’s negotiation, not wanting it to leave at all, deliberately exaggerated the horrors of ‘No Deal’, so that both sides in the referendum would unite behind the softest possible exit terms. Brexiteers are especially incensed that they accepted EU claims that an open Irish border required an ongoing customs-union arrangement (rather than a technological solution), and ignored those analyses of ‘No Deal’ that pointed to economic gains rather than seizure and slump.

  • Inadequate No Deal preparations

Just as those who desire peace may have to prepare for war, the UK needed to show that it could withstand a No Deal exit in order to wring concessions from the EU that would make for an acceptable deal. In the event, the UK may have done too little, too late in terms of stockpiling essential medicines and digging extra lorry parks along the M26. Once Brussels could see that the lack of a deal would cause major disruption, it was easier to offer a deal that fell well short of the government’s original ‘red lines’.

  • No Deal too costly for the UK

One reason for the lack of serious preparation for No Deal may have been the up-front cost, which had to be set against the additional benefits that might have arisen from scaring the EU into believing it might happen. The UK’s costs of preparing for No Deal are an indication of the losses it would incur if this were to happen. These costs are not all absorbed by the government, and large bills for comprehensive contingency planning may have persuaded many private firms they just couldn’t afford it. Once the bill for coping with disrupted supply chains and labour shortages has risen into the billions, it’s clear that the UK would prefer to do a deal, and the credibility of survival without one falls away.

  • No Deal not costly enough for the EU

Even if it had clearly shown an ability and willingness to leave with No Deal, the UK would have gained little from this if the EU could show matching resolve. Whereas Brexit was pitched to UK referendum voters as a route to economic gain, the EU approached negotiation with a broader agenda. It wanted to show that member states could not leave without losing the benefits of membership, and that the single market’s ‘four freedoms’ were to promote social solidarity and political integrity as well as prosperity. So even a more adverse economic prospect might not have weakened its resistance to an advantageous UK deal.

From Ireland’s perspective, the large one-off costs of the UK leaving with No Deal may have been outweighed by the long-term costs of the deal the UK was eventually offered. Its stance may have been emboldened by widespread belief that, however high the cost of No Deal south of the border, its even worse impact on Northern Ireland would leave the UK suffering more.

However much the UK’s eventual draft Withdrawal Agreement fell short of many Leavers’ as well as Remainers’ expectations, it did contain the promise (for the foreseeable future) of all the customs-union and many of the single-market benefits, without some of the costs. But the more ambitious Brexiteers will always see it as a missed opportunity, the Good Deal lost for want of better No Deal preparation. And by taking so long to reach their Agreement, the UK has allowed the EU to rule out any further negotiation. If it had dug deeper for lorry parks near Dover two years ago, the government might now be in less of a hole.


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