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Why ‘No Deal is better than a Bad Deal’ couldn’t fly

Updated Tuesday 26th March 2019

The unmanageable cost of leaving without a Withdrawal Agreement helped the EU impose one that few would ever like.

To secure a Withdrawal Agreement on better terms that those assigned to Norway and Turkey on the edge of the EU (or Switzerland within it), the UK had to ensure that “No Deal is better than a Bad Deal”. Brexiteers who regarded Theresa May’s deal as a betrayal of their 2016 vision, or endorsed it only with humble apologies when all other exits seemed blocked, will always believe that a chance was missed by failing to put credible No Deal plans in place.

Stark warnings from industry about shortages of medicines and essential food, and difficulty lining up extra cross-Channel ships, gave EU negotiators a clear impression that the UK was unprepared for leaving without a deal - even after the emphatic first defeat of Theresa May’s proposals in January 2019. That hardened Brussels’ stance, ensuring that a Deal which fell short of May’s original demands could be brought back twice to Parliament, with opposition subsiding as MPs realised the only other way out was a cliff and not a lift. 

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 too deep

While critics accuse them of losing the No Deal weapon through half-hearted preparation, ministers and civil servants soon found that keeping No Deal credible was a Herculean task. So much UK export and import flows through Dover and Calais that just a few extra minutes, for additional inspections or paperwork checks, would soon turn motorways into lorry parks.

UK supply chains are now so intertwined with those of the EU that any divergence, from the Customs Union’s uniform tariffs or the Single market’s common standards, can impose significant extra cost. Just-in-time production has spread so far, on the basis of frictionless trade with the rest of Europe, that the UK does not have sufficient warehouse space for the stockpiles that could build up before or after a ‘No Deal’ departure.  

While Brexiteers maintained that the UK without a Withdrawal Agreement could trade on World Trade Organisation (WTO) rules, questions were raised from the start about how much protection these offered. Agriculture, food, vulnerable industries and services (making up over 70% of national output) are not covered by the WTO fall-back. Without its own WTO schedule, some legal experts have denied that the UK could switch to WTO rules immediately, pointing to ongoing negotiations that might take another seven years.

Too costly a contingency

To make it an effective threat, the UK did not need to shield itself from all possible No Deal disruptions. It only had to ensure that departure without a deal would inflict more pain on the rest of Europe than on itself. Brexiteers often invoked Germany’s carmakers, trusting them to twist their own government’s arm to ensure a clear route to their UK outsources. But the likely damage to Ireland, whose trade with the EU largely runs through the UK, seemed an even bigger reason for Brussels to yield to UK demands.

Fundamentally, making ‘No Deal’ credible confronted the UK with the problem always faced by those preparing for war in pursuit of peace.

In practice, the belief that No Deal damage would be concentrated on Ireland was never enough to soften EU negotiators’ stance, since Northern Ireland stood to lose even more, in terms of social and political stability as well the economy. And the EU is at least as well placed to channel emergency help to Ireland as was the UK to Northern Ireland, to which it had already slipped an extra £1bn to secure Democratic Unionist support for May’s Westminster government.

Fundamentally, making ‘No Deal’ credible confronted the UK with the problem always faced by those preparing for war in pursuit of peace. It meant investing large sums (and asking industry to do the same) that would entirely go to waste if preparations were successful. Britain’s coastal castles and nuclear bunkers, having not come under attack, at least bring tourism and architectural interest.

The costs of giant lorry parks and refrigerators are harder to recover. That made the Treasury reluctant to incur them; and when it finally began to commit large funds to Brexit preparation in 2018, they arrived too late for most departments to assign them effectively.

Bargaining without power

Brexiteers blame opposition parties and employers’ organisations, as well as the government itself, for ruining the chance of a ‘clean break’ by taking the No Deal option off the table. But when the CBI and TUC joined forces to campaign against No Deal, they were reflecting a widespread view – among those who actually comprise the economy – that 45 years of eliminating tariffs and non-tariff barriers from cross-Channel trade could not be suddenly scrapped without horrendous cost.

 

 

 

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