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What will happen to the UK after Brexit - deal or no deal? OLD

Rob Merrick
·3 min read
 (PA)
(PA)

Amid all the Brexit fog, two things are certain – that leaving the EU will make the country poorer and that Boris Johnson will never, ever, admit that fact.

His granite-hard exit terms, mean businesses – and the poor people of Kent, soon to be the lorry-park of England – face huge delays and disruption, regardless of whether a trade agreement is struck or not.

But, when it comes to ordinary people, the prices they face in the shops and the danger of losing their jobs next year, the outcome of the deadlocked talks will make a huge difference.

Deal

With “neither the government nor businesses fully prepared” for leaving the single market and customs, says the Office for Budget Responsibility (OBR), GDP is expected to dip by around 1 per cent in the first quarter of 2021 alone.

That would be the taster for a permanent 4 per cent drop in productivity in the long run – perpetuating the British disease that lies behind the miserable economic performance of recent years.

The Treasury’s own analysis suggested the skinny ‘Canada-style’ deal the prime minister seeks would strip up to 6.7 per cent from expected GDP over 15 years, meaning £130bn of lost growth.

And remember the country is already significantly poorer because of shrivelled growth since the 2016 referendum – to the tune of about £600m for every week since the vote, one 2019 analysis found.

But, agreement on the hoped-for ‘no-tariffs, no-quotas’ deal with the EU would shield Britons from an immediate, sharp hit to their cost-of-living next year.

No deal

Last week’s OBR report warned that new tariffs and a likely plunging exchange rate will push up prices by 1.5 per cent by the middle of the decade.

Now, that doesn’t sound very much – but it masks potentially big hikes in the items that matter the most, especially to poorer people already hurting from the knock-on effects of the pandemic.

Crucially, when a no-deal loomed 18 months ago, the government said it would abolish tariffs on most food and drink imports, but the new UK Global Tariff (UKGT) is very different.

Average tariffs on EU food imports would be a whopping 20 per cent, it has been calculated – with similar increases in shelf prices very likely.

More costly tinned vegetables (up 6.8 per cent), baked beans (7.1 per cent), tinned fruit (8.75 per cent), dried pasta (22.6 per cent), tinned tomatoes (11.4 per cent) and evaporated milk (27.6 per cent) can all be expected, The Grocer website calculated.

And, if sterling crashed by 15 per cent – as the Bank of England has predicted in the past – “price rises of 20 per cent across the board” can be expected.

GDP would face a further 2 per cent hit next year, delaying the economic bounceback from the pandemic by a further 12 months.

Then there is unemployment, already expected to be 2.6 million by next summer. The OBR verdict is that another 300,000 people would join the dole queues.

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