Whitehall must assess impact of Brexit without a trade deal, say MPs

Committee says more work is needed on the economic impact of leaving the EU on WTO terms

By Richard Johnstone

04 Apr 2017

The government has been urged to set out what contingency planning is taking place across Whitehall for the possibility that the UK will leave the European Union without a new trading pact in place.

In its review of the government’s white paper on the Brexit negotiations, the Exiting the European Union Select Committee said prime minister Theresa May’s claim that “no deal is better than a bad deal” was being made without evidence.

This was because, as secretary of state for Exiting the European Union David Davis told the committee, no assessment had been made since the Brexit vote about the economic impact of leaving the EU without a deal setting out the UK’s future relationship with the bloc.

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Committee chair Hilary Benn said that the government “is right to try and negotiate both the divorce settlement and a new trading relationship in tandem”. However, it must be prepared for leaving without a deal because the two-year timescale allowed by Article 50 exit process was “particularly tight”, he said.

“The government should conduct a thorough assessment of the economic, legal and other implications of leaving the EU without a deal in place,” Benn said. “The public and parliament have a right to the maximum possible information about the impact of the different future trading options being considered.” 

Without an economic impact assessment of no deal, or evidence that steps are being taken to mitigate the damaging effect of such an outcome, the government’s assertion that no deal is better than a bad deal was unsubstantiated, Benn added. “Parliament must be in an informed position to decide whether a proposed deal is, in fact, better or worse than no deal.”

Leaving the EU to default onto World Trade Organisation rules “would be no less important for the UK’s economic future than the terms of any future free trade agreement,” the former shadow foreign secretary said.

“The UK is about to enter into enormously important and complex negotiations covering trade, customs rules, access to the single market, security and foreign policy co-operation and the rights of UK and EU citizens at home and abroad,” he said. “We all want the best possible deal for the UK but what we are able to secure will ultimately depend on what the 27 member states are prepared to agree to.”

Responding to the report, Brexit secretary David Davis said the government had been clear that it was “seeking a deep and special partnership with the EU, taking in trade and the many other areas where we have shared aims and values, such as security”.

He said: “We are confident that such an outcome is in the interests of both sides. However, a responsible government should prepare for all potential outcomes, including the unlikely scenario in which no mutually satisfactory agreement can be reached, and that is exactly what we are doing.”

He insisted that the government had been “analysing the impact of different scenarios on different sectors of the economy”.

"We are clear that no deal is not what we want or expect, but that it would be better than a deal which sought to punish the UK,” he added.

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