Countdown to Brexit No Deal Might Be the Worst Deal of All
With just 200 days left to go until Brexit, a failure to secure a negotiated deal is looking increasingly possible. That would be disastrous for the European Union, but even worse for the British.
It's the early morning hours of March 30, 2019, and the disaster is only slowly beginning to unfold. British radio stations report on the first traffic jams at the ferry docks of Dover and Folkstone. Flights from Heathrow, Gatwick and other airports to Continent have been canceled. All of them. It's Saturday, so the stock markets are relatively quiet. At least for now.
Two days later, though, the pound takes a nosedive, bringing the share prices of British companies down with it. Alarmed by news reports that just get more disturbing as they pour in, the British begin emptying the supermarket shelves. Gas stations start to run out of gasoline. Remote areas such as Cornwall or Scotland declare states of emergency.
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After just one week, hospitals report a lack of vital medications. The first reports of theft and looting make the rounds. Given the massive transportation and traffic chaos, the police are spread so thin that they don't know what else to do but call for military backup. Meanwhile, the government in London just watches the unfolding events helplessly as everyone is too busy fighting for political survival.
Is this what Brexit is going to look like when it finally rolls around in fewer than 200 days from now? The worst-case scenario presented here is what you get when you cobble together findings from numerous independent studies and British reports aimed at predicting what might happen in the case of a no-deal Brexit. Or is it just scaremongering, as EU haters in the UK insist? A repeat of the so-called "Project Fear" with which Remainers sought to torpedo the Brexit referendum? Will everything be okay in the end?
The truth is that no one really knows.
But it is also true that only three months remain for the British government and the EU to negotiate a divorce settlement that will prevent human, economic and political disaster on both sides of the English Channel. In mid-December, London and Brussels must present a highly complex exit agreement as well as a ready-to-sign declaration about the future relationship between Britain and the EU. That's the timetable that must be met to give the 28 national parliaments sufficient time to vote on the future relationship with Britain, as required under the EU treaties.
And yet, the only thing that has been presented so far is the Chequers proposal from Prime Minister Theresa May -- a proposal that Brexiteers, Remainers and EU bureaucrats in Brussels have all publicly shredded in a rare show of harmony. Time, in other words, is short. Yet half of Britain would nevertheless prefer to focus on the extramarital affairs of ex-Foreign Secretary Boris Johnson.
No wonder, then, that British business leaders, doctors, government employees and everyone else are getting nervous. A constantly growing number of emergency plans are being produced, all of them focusing on what might happen if Britain crashes out of the EU without a deal -- and many of those plans are coming from the government itself. All of them seem to come to the same conclusion: A "no deal" Brexit would be terrible for Britain's immediate future.
Only now, after two years of muddling, does London look as though it is beginning to take things seriously. Were negotiations with Brussels to end inconclusively, that would mean that Britain, on the day it left the EU, would be treated like any other country that is not a member of the European bloc. Britain's borders with the EU would no longer be open. Goods would be monitored and customs duties would be levied. All agreements pertaining to air traffic, the fight against terrorism, stock exchange transactions and trade in nuclear material would be null and void. And there would be no transitional period for the people and companies affected. Nor would there be any for the Irish and the Northern Irish, whose peace is largely attributable to a borderless Europe.
Helplessness in London
Theresa May did take the step last week of summoning her cabinet to a special "no deal" meeting last week. And her government has also published additional handouts preparing the domestic economy for a disaster scenario. Overall, though, the general impression remains one of helplessness.
London, for example, has actually begun advising Northern Irish companies to "speak to Dublin" for advice on questions about the future. Earlier contingency plans were apparently so embarrassing even for May's own people that they disposed of them before they could be published. Meanwhile, the idea of equipping Northern Ireland, which relies on Irish electricity, with thousands of generators if necessary, was rejected as impractical. The problem is, though, that there aren't any better ideas lying around.
Who could have imagined, after 45 years of EU membership, that Britain would be so deeply interwoven with the European continent, down to the tiniest of details? Those shocking images on cigarette packages? The EU holds the copyright. Certificates for British organic farmers? Issued by the EU. Insulin for diabetes patients? Imported from the EU. And a large share of the sperm donated for British couples comes from Denmark in the EU. All that will end if Britain crashes out of the EU with no deal. The latter item should at least be welcome news to pro-Brexit hardliners who already believe the country has been overrun by foreigners, even if it is Danish sperm. But it certainly wouldn't do anything to resolve more pressing problems -- such as trade with the remaining 27 EU nations.
Time Consuming and Expensive
Trusting that inner European borders would remain open, tens of thousands of companies in Britain and on the Continent have spent decades setting up and continually optimizing supply chains that span the English Channel. It's possible to see exactly what this means at the Port of Rotterdam, one of the most important gates to Europe for Britain. Around 10,500 boat loads of goods are shipped back and forth to the UK through the port each year. As things currently stand, a brief inspection of the trucks and a single form to be presented on both sides has been sufficient for the release of the goods.
In the event of a no deal, that will no longer suffice, says Roel van 't Veld, a Brexit coordinator at the Dutch customs office. He notes that if Britain reverted to being a third country, as non-EU countries are referred to, importers and exporters would have to fill in up to nine additional documents. "Most companies aren't prepared at all," he says, adding that customs controls, which are both time-consuming and extremely expensive, would be inevitable.
British shipping companies on the other side of the channel have already done the math. Ten thousand heavy trucks pass through the Port of Dover every day. Most are processed in less than two minutes. According to the shipping companies, two more minutes would result in a 30-kilometer-long traffic jam in no time at all. The reality, however, is that checks could take up to 45 minutes in the event of a no-deal Brexit. The British government has begun planning to transform entire motorways in the southeast into vast truck parking lots should it come to that.
Patricia Michelson would like to prepare for that possible emergency, she just doesn't know how. It's a Thursday in late August and the lively yet frustrated 70-year-old is sitting in her Fromagerie, a boutique-like grocery store in the heart of London that looks more like a museum of the edibles than a cheese shop. She opened her shop in 1992 and has been importing tons of cheese from all over Europe ever since. She still doesn't know how she's going to import all the goods she sells after Brexit. Or who is going to get stuck with the bill.
Should "no deal" become a reality, trade between the UK and the EU would be conducted in accordance with World Trade Organization rules. Significant levies would have to be paid on food -- 22 percent for chicken, 40 percent for beef and 44 percent for cheese. "I have no idea how that is supposed to work," says Michelson. She has attended government-organized seminars aimed at explaining Brexit to business owners. "There were always very nice young men there," she says. But they only had one answer to Michelson's questions: "We don't know either."
An Abyss for Businesses?
Countless companies are in a similar situation, and yet it appears that there is nobody out there who can help them. "In the event of no deal, tens of thousands of small- and medium-sized businesses would be pushed over the cliff overnight," says Carolyn Fairbairn, director general of the Confederation of British Industry (CBI). "No one should underestimate the seriousness of the situation."
Large companies have already spent massive sums of money preparing for Brexit day. Pharmaceutical companies like AstraZeneca and Novartis have begun increasing the amounts of medicines they have stockpiled. Large food chains have also asked their suppliers to create reserves of non-perishable goods. And aircraft manufacturer Airbus also wants to have enough aircraft parts in stock by the end of March to last for a month. "That is neither cheap nor easy to do," says Tom Williams, a Scot who is the company's chief operating officer, with responsibility for day-to-day operations. "We don't build microchips -- we're talking about components, some of which are over 30 meters in size." He estimates the cost of this to be in the hundreds of millions of euros.
With 15,000 employees, European joint venture Airbus is one of the UK's largest employers, with the wings for all Airbus aircraft being built in the country. "Our supply chains on both sides of the canal are like a spider web. A piece of metal manufactured in Germany is further processed in the UK before it is installed in the aircraft in Toulouse. In the end, everything comes together," says Williams. While no one is hoping for Brexit without a deal, he says, "the only thing that we can prepare for today, unfortunately, is this worst-case scenario."
He points out that it must also be clear that this won't just affect Airbus plants in Britain, but also at its main facilities in Hamburg and Toulouse. "Brexit isn't just a British problem -- it's a European one."
'Recipe for Disaster'
Recently, the head of the government in the Flanders region of Belgium described a possible failure of the Brexit negotiations as a "recipe for disaster." He says 28,000 jobs in the region could be immediately threatened by Britain's departure from the EU without a deal. It's Britain's immediate neighbors in particular -- led by Ireland, but also the Netherlands, Denmark and the coastal regions of France -- that would experience considerable problems at the beginning. In all those places, there is a lack of storage capacity, open space for trucks, customs officers and other personnel. Later on, it would also hit countries like Hungary or the Czech Republic with full force. The think tank Oxford Economics estimates no deal would lead to a loss in economic output for the remaining 27 EU member states of 112 billion euros through the year 2020.
The pain would be even more intense for the UK, which the institute predicts would suffer losses of 140 billion euros. And it's not alone in making that prediction. "From our perspective, the consequences could be even far graver than what the British government is preparing its people for," says Joachim Lang, director general of the powerful Federation of German Industries (BDI). "We would be able to overcome it because we have the other Europeans in the EU. But the British would have no one left."
But the raw figures alone don't go far enough in illustrating how deeply a no-deal could shake Britain. Few believe the British would simply be willing to put up with empty shelves, horrendous prices for vegetables, meat and gasoline and chaos in the hospitals, on the streets and at the airports. Companies like Amazon have begun warning about the possibility of "civil unrest." The government claims there are no plans to deploy the army. But that's also not entirely true. Recently, a confidential police document was leaked to the media in which calls for the military to help are described as a "real possibility."
The long-term consequences aren't even remotely foreseeable. Chancellor of the Exchequer Philip Hammond has warned of possible new borrowing of up to 80 billion pounds a year until 2033. Internally, he is planning substantial cuts in public spending in a country that has already gone through eight years of brutal austerity measures.
Is no deal really "better than a bad deal," as Theresa May seems to repeat like a mantra? There are growing signs that she no longer believes that herself. When she travels this week to Salzburg, where EU leaders will be holding an informal summit, May will essentially be there as a supplicant promoting a last-minute agreement. But to reach that deal, she is going to have to make further concessions. And that's also her dilemma, because the further she pushes her position in the direction of the EU, the further that line will also be moved away from the Brexit hardliners in her Conservative Party, who have enough power to block any deal.
They consider all the warning calls to be little more than horror stories dreamed up by the business community, politicians and the health care system. Do not listen to the prophecies of doom, millionaire and parliamentarian Jacob Rees-Mogg warned last Tuesday. One of the leading Brexiteers, he appears to still hold the belief that Britain will flourish after a hard Brexit. Rees-Mogg says his country has "nothing to fear" from a no-deal scenario.