Published today (19th July 2019) the latest report from the cross-party House of commons Brexit committee warns that a no deal-Brexit could have damaging consequences for almost every area of the UK economy.
The publication of the report - based on evidence taken from representatives from a number of different sectors of the UK economy - follows the latest forecast from the independent Office for Budget Responsibility that a no-deal Brexit could cause a £30bn hit to the public finances and push the UK economy into recession.
Presumed Prime Minister in waiting Boris Johnson has pledged to deliver Brexit “do or die”.
“A no deal Brexit … would be at best a foolhardy gamble and at worst, lead to severe disruption, and it is neither desirable nor sustainable as an end state for our economic relations with the EU,” said the Committee’s Chair, Hilary Benn MP.
“We heard from representatives of important sectors of the UK economy which are all great British success stories. Every single one warned us of the damaging consequences faced by their members in the event of a no-deal Brexit.
Outlining the messages from these sectors Benn said: “The UK’s position as the front-runner destination for venture capital investment in technology firms would be jeopardised. The UK’s car industry would be put at a competitive disadvantage because it would face tariffs on its exports to the EU and interruptions to its highly integrated supply chains. ‘No deal’ would lead to problems with some food supplies and, we were told, would be ‘disastrous’ for UK farming. The sudden introduction of tariffs on the pharmaceuticals and chemicals industries would seriously challenge the viability of their supply chains. The UK’s higher education sector – a world leader in science and research - would experience a short-term shock and longer-term reputational damage from which it would struggle to recover. And UK services businesses would risk loss of market access and face uncertainty about how no deal would affect their staff working in the EU because they would be treated as third country providers by the EU.
The report also dismisses Johnson’s repeated claim that an obscure WTO regulation will ensure smooth trading in the event of no deal. “Without a deal the UK could not rely on Article XXIV of the GATT to maintain current tariff-free trade arrangements with the EU. If the UK were to leave the EU without a deal, the European Commission has said the UK will become a third country without any transitional arrangements.”
The findings of the report have been welcomed and reiterated by many in industry. Food and Drink Federation COO Tim Rycroft, who gave evidence to the committee, said: “A no-deal exit from the EU would be disastrous for the UK’s food and drink industry, as we said in our evidence to the Committee.
“Our industry employs 450,000 people and has a turnover of £104bn. Analysis released earlier this week by the UK Trade Policy Observatory found that no-deal would destroy £18.5bn of UK food and drink manufacturing,
Rycroft added that no deal will have grave consequences for UK consumers. “Within weeks it is likely that shoppers would notice significant and adverse changes to the products available and random, selective shortages. Limited shelf life products would face the most immediate risk….UK food imports will climb from autumn onwards as fresh food stocks decline, so any ‘no deal’ disruption will have a major impact on availability.”
Commenting on today’s Brexit Committee report Stephen Phipson, CEO of Make UK said: “No deal would leave manufacturing in dire straits: facing tariffs on the import of goods, just in time delivery logistics would become inoperable, business would be unable to access the people to ensure British companies can fill vacancies where they have skills gaps or send workers to the EU for service contracts and other commercial opportunities.
“Also in jeopardy would be the commitment to maintain mutually recognised, close regulatory alignment with the EU, supported by a system of arbitration and standard setting to ensure that British firms can produce goods that can easily be traded across Europe with clear protections in place.
“Some major companies have already voted with their feet and switched their planned business operations away from the UK. This is only going to get worse the longer the uncertainty prevails, and once these jobs and the opportunities they bring are away from UK shores, they will never return.”
Meanwhile, Mike Hawes, chief executive of auto industry trade body SMMT said: “We have always been clear about the devastating consequences of ‘no deal’, and as the report says, planning for such an outcome has already ‘had a chilling effect on investment in the sector’..‘No deal’ must be avoided at all costs or risk irreversible damage to this vital sector.”
In a separate development, 47 per cent of firms believe the impact of Brexit is a greater threat to growth than cost pressures (45 per cent), political uncertainty (44 per cent) or weak growth in the UK economy (43 per cent).
These are just some of the findings from Lloyds Bank Commercial Banking’s Business in Britain report which surveyed 200 of the country’s largest manufacturers with a turnover of £50m or more. The report found that almost four in five (79 per cent) forecast their turnover will increase over the next five years, and by an average of 12 per cent.
Among exporters – 93 per cent of those businesses surveyed – 55 per cent said demand from overseas buyers was growing, while 16 per cent said it was declining.
Even amid Brexit uncertainty, a third (33 per cent) of manufacturers said the EU would remain their most important growth market for the next five years, followed by China (15 per cent) and North America (13 per cent).
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I'd like to know where these are operating in the UK. The report is notably light on this. I wonder why?