MOSCOW (Pakistan Point News / Sputnik - 09th April, 2019) A potential no-deal Brexit could have disastrous consequences for the UK economy, possibly lowering living standards, experts told Sputnik.
The United Kingdom has already been given one Brexit deadline extension by the European Council, but it appears in need of another one. At the moment, unless a new delay is granted, the United Kingdom risks tumbling out of the bloc on April 12 without a deal.
The UK parliament has rejected the government's withdrawal deal three times, although it has also voted against leaving without an agreement. After the deal was last voted down in late March, European Council President Donald Tusk called for a special council meeting on April 10. The European Commission said at the time that a no-deal Brexit became a possible scenario.
UK Prime Minister Theresa May has written to Tusk, asking for an extension until June 30.
In the absence of a withdrawal deal, UK will fall back on the World Trade Organization rules in trade with other countries. The United Kingdom would have to apply WTO tariffs to every country and could not single out EU member states unless they had a special trade deal.
This would leave the country with a difficult choice: either implement WTO-mandated tariffs and risk higher prices for consumers, or slash import tariffs for all countries. The UK government has indicated it would temporarily cut tariff rates on some products to zero in case of a no-deal Brexit.
"Leaving the EU without a deal would be very bad for the UK economy leading to severe disruptions to trade and production and, possibly, causing a recession. In the longer-run trading with the EU on WTO terms could reduce UK income per capita by up to 9%, which would cause a substantial fall in living standards," Thomas Sampson, an associate professor in the Department of Economics at London school of Economics (LSE), told Sputnik.
Dr Kostas Maronitis, a lecturer in Politics and International Relations at Leeds Trinity University, has stressed that a no-deal option should not be even considered.
"The no deal scenario is a euphemism for a very bad deal that will favor disproportionally the EU. If the UK leaves with no deal it will eventually have to craft a trade deal that will benefit EU consumers and producers. No deal means a return to the existing state of affairs," Dr Maronitis told Sputnik.
The Leeds Trinity University scholar added that absence of a deal "would mean the supremacy of EU institutions over the politics and polices of the UK for a long time."
SCOTLAND MAY POSE BIGGER CHALLENGE THAN TRADE
However, Jonathan Story, an emeritus professor of International Political Economy at INSEAD, believes that leaving without a deal may have "very little economic impact."
"I think leaving into WTO is not the government's priority. But it could happen. The government has made contingency planning; and it has said that tariffs on 85 percent of good will fall to zero. In other words, unilateral free trade," Story told Sputnik.
The Scottish National Party's (SNP) quest for independence will be the biggest challenge in a no-deal scenario, the INSEAD professor argues.
"The main challenge will be the SNP who are hoping � they say � for a second referendum. Polls suggest Scots may vote for. But then Scots are notorious for thinking of the impact of independence on their pockets," Story said.
IS MAY'S DEAL BETTER THAN NO-DEAL?
The current withdrawal agreement is better than no deal at all, but still not the best option, according to the LSE expert.
"Leaving with the current Withdrawal Agreement would be less economically damaging than leaving without a deal, but would still be worse than a softer Brexit or staying in the EU. Barriers to trade with the EU would increase, particularly for services, and this would hurt the UK economy," Sampson said.
In a bid to secure a compromise on Brexit, May launched talks with the opposition Labour party, which has been calling for a closer alliance with the bloc on customs union and in other sectors. Depending on how these talks go, the House of Commons may be given a "softer" version of the withdrawal deal for a vote.
