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What will Brexit cost us?

A no deal Brexit on 31st October is now most likely. Spokespeople for the EU are saying very bluntly that the only deal they will offer us is the one they negotiated with Theresa May, which was rejected by MPs in three stunning defeats. Boris Johnson, May’s probable successor has said unambiguously that he is prepared to take us out without a deal if he cannot negotiate an alternative. What are the implications of that for the UK economy?

The answer is not a happy one. The Bank of England foresees border delays, markets losing confidence in the UK and the economy contracting by at least 5%. The Treasury forecasts at least an 8% contraction by 2035 so the effects would not be short-lived and it risks foreign investors turning their backs on Britain. EU import tariffs would hurt our industries, especially the car industry. The UK automotive industry that employs 800,000 people could see many of them made redundant.

Part of the preparation for Brexit are attempts to avoid chaos at the ports as EU rules will require non-member trucks going to the EU to be checked through the ports. A study by academics at Imperial College reckon that an extra 2-minute check on each vehicle at the Channel ports could cause traffic queues 29 miles on the motorways leading to the ports.

Brexiteers dismiss these predictions as scaremongering and suggest that technological solutions will be found to overcome the problems. It is unclear what technology they have in mind but it isn’t in place and October 31st is only three months away.  The French authorities are planning to recruit hundreds of customs officials to avoid congestion in their ports so presumably we will do the same.

What the Brexiteers cannot dismiss so lightly is that the 27 EU member states are the UK’s largest trading partner. 44% of all UK exports go to the EU and 53% of all UK imports come from the EU. 40% of our exports are financial and business services and they will now face fierce competition from EU competitors, disadvantaged by the additional tax burden. At the same time our Government is thinking it will scrap import tariffs, especially on foodstuffs to avoid price increases. Our own farmers will face high EU tariffs. Minette Batters, President of the National Farmers Union, says these tariffs would be catastrophic for British farmers. 40% of British lamb is sold to the EU. If it is priced out of EU markets 25% or more of UK farmers could go out of business. 

Batters’ fears are echoed by the Plaid Cymru MP, Jonathan Edwards, who foresees “hundreds, if not thousands” of Welsh farms facing impossible pressures.

It is the possibility of damage to the UK economy from a no deal Brexit that has caused Philip Hammond, the Chancellor of the Exchequer, to vehemently oppose a no-deal Brexit. “If the new Government tries to drive the UK over a cliff-edge called no-deal Brexit, I will do everything I can to stop that happening”. He scathingly dismissed Boris Johnson’s claim that he will deliver a deal with the USA within a year. He and Liam Fox, Secretary of State for International Trade and a committed Brexiteer, have both recognized that trade deals are complex and scorned Johnson’s naïve optimism. 

But Hammond has also forecast that a no-deal Brexit could cause a “hit to the Exchequer of about £90billion”.He is backed by the Business Secretary Greg Clark who on the basis of evidence given him by industry, expects a no-deal Brexit to lead to the loss of “many thousands of jobs”.

With all these potential damaging consequences of a no-deal Brexit, why is Boris Johnson so committed to a no-deal Brexit? It is because he is in step with the Conservative party members who will vote him into office. A YouGov poll in June found that 61% of them want Brexit even if it caused “significant damage to the economy”. They were also willing to destroy their own party and see the break-up of the UK if that is what Brexit will costs us.

The cost of Brexit will be high especially for those who lose their jobs and livelihoods. We can pray for them and we can pray for the MPs who must decide if the cost is worth paying. Wherever we stand on Brexit we can surely pray, “your Kingdom come, your will be done on earth as it is in heaven”. (Matthew 6:10)

 

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