What is a no-deal Brexit and what might happen as a result?

Brexit Day looms ever closer on the horizon: it is now just 72 days until the UK is due to leave the European Union.

After Theresa May’s Withdrawal Agreement was humiliatingly obliterated by British MPs in Tuesday’s meaningful vote, she and the myriad factions in the Commons now have to find something they can agree on.

A no-deal Brexit remains the default if politicians cannot come together in squeaky bum time to formulate an alternative.

Theresa May and the vast majority of MPs from all sides of politics have attempted to downplay the risk of this occurring after March 29, saying there is no consensus to drop out without an agreed Withdrawal Agreement.

But Westminster is suffering from political paralysis and time is running out.

– What is a no-deal Brexit?

On March 29 the UK would quit the EU without a withdrawal agreement with the European Union covering issues including the Irish border, expats’ rights in Europe or a future trade deal, among other things.

– What will happen if Britain leaves the EU without a deal?

Either a cataclysm of Biblical proportions or a minor hiccup on the path to self-determination, depending on your point of view.

– Who is concerned?

British businesses that rely on unhindered imports and exports like pharmaceuticals, farming, haulage, and car and aircraft production. They have warned that it could be catastrophic for business and jobs if customs checks are reintroduced in Dover and other British ports. There have also been warnings about food supply and safety, and availability of medicines like insulin.

– Can the effects be mitigated?

Some MPs, reportedly including Cabinet ministers, have suggested a “managed no-deal Brexit”, in which there is a two-year transition period after March 29 – as with the Withdrawal Agreement – which would give the UK more time to be ready to counter the negative impacts.

– But not everyone thinks it would be disastrous anyway?

No. Some Brexiteers, including former Brexit secretaries David Davis and Dominic Raab, argue that many of the warnings are overblown, including on the customs/border problems. They say that there may be some minor hiccups but they can quickly be overcome and the UK could do global business on World Trade Organisation terms quite happily.

– What are these terms?

The WTO is an organisation with 164 nations as members, who between them make up 98% of global trade. It has its own rules, which require tariffs on many imports and exports, and which can be used in the absence of an overriding free trade agreement between two member states. The UK has yet to negotiate any new trade deals with any other countries in preparation for leaving the EU.

– What do economists say?

Separate assessments from Whitehall and the Bank of England in November painted a grim picture of the impact of a no-deal Brexit on the UK economy. The Bank warned Britain could be tipped into a recession worse than the financial crash, with an 8% cut in GDP, unemployment surging by as much as 7.5% and house prices falling by almost one-third. Meanwhile, a cross-Government analysis found the UK economy would be 9.3% smaller after 15 years if Britain leaves without a deal.

– Would Britain still have to pay the £39 billion Brexit divorce bill to Brussels under no-deal?

£39 billion

Britain’s estimated Brexit ‘divorce bill’ when it leaves the EU

Again there is disagreement. Some more hardline Brexiteers say the UK should walk away without paying. Others have suggested payments could be linked to a free trade agreement. The Government has said that the bill includes legal obligations, with defaulting affecting the UK’s international credit rating and sparking a challenge by the EU in court.

– What does the British Government say about no-deal?

Theresa May used the prospect of a no-deal Brexit, and the damage it could cause, as a carrot/stick to convince sceptical MPs to back the Withdrawal Agreement in a vote. But other ministers have been less negative, with International Trade Secretary Liam Fox telling the BBC’s Today programme on Monday: “I don’t regard no-deal as national suicide. This is not Dunkirk, this is leaving the European Union.”

– Did Mrs May’s approach work?

Not in the slightest. She has entered the record books as the British Prime Minister with the heaviest Commons defeat in modern history after her 230-vote reverse on Tuesday.