If the UK leaves the European Union without being able to complete a Brexit trade deal, it could be forced into World Trade Organization tariffs – an option that is under serious consideration by the UK government.
However, Paul Drechsler, president of the UK Confederation of British Industry (CBI), cautioned that leaving without a deal would bring significant tariff and regulatory barriers to trade, opening a “Pandora’s Box of economic consequences.”
“Wherever I go across Europe, I hear concerns about the UK leaving without a deal and falling into World Trade Organization rules,” he said recently during a speech in London, given at the Lord Mayor’s Business and Investment dinner.
“We should be under no illusions about what this would really mean. A ‘no deal’ scenario would open a Pandora’s Box of economic consequences,” Drechsler warned.
“The UK would face tariffs on 90 percent of its EU exports by value and a raft of new regulatory hurdles,” he said, noting that such barriers would hurt firms in the UK as well as the EU.
“Here in the UK and across the continent firms are worried about this worst-case scenario,” he affirmed. “Some are getting ready for it to reduce economic damage. Some won’t prepare because they’re hoping for a deal. But, in reality, many firms can’t prepare because the cost of change is simply too high to even consider it.”
Drechsler offered some words of warning to those who prefer for Britain to walk away from the EU without a deal: “You’re not only wrong but also irresponsible.”
Discussing the practical hurdles to trade under WTO rules, he cited the example of a small cosmetics firm in England that sells its products in French shops. Without an EU office, it would be illegal for those French shops to sell the cosmetic firm’s products, which would hit both the UK firm and its French outlets, he explained.
As a result, Drechsler emphasized that it’s important to secure “an ambitious deal that works in everyone’s interests.”
Not only do European countries benefit from a thriving UK, but British businesses also need a strong European Union – a strong single market with which UK companies can easily trade, he affirmed.
Getting a “smooth Brexit” that minimizes disruptions across the EU is in everyone’s interest, he said.
“Whether you’re a salmon farmer in Scotland, an aerospace giant in the Midlands, or a tech start-up in Cambridge, Brexit will affect your business,” Drechsler added.
Source: Confederation of British Industry
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