How much will no-deal Brexit cost the UK? The staggering estimate as Boris snubs EU

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The EU summit is currently being held in Brussels where officials from the EU have decided to give the UK another extension in an attempt to come to some sort of agreement for the new year. The clock is ticking for both sides to thrash out a deal after yet another deadline passed with no resolution to the ongoing sticking points between the powers.

The UK formally left the European Union at the end of January but will stay under the bloc’s rules until the end 2020, as the two sides try to hammer out permanent arrangements on everything from fisheries to finance.

Talks held in recent weeks have made progress on several areas, but the contentious issues of fishing and state aid are still outstanding, with little time left to make a comprehensive deal happen.

Despite October 15 being Boris Johnson’s self-made deadline, meetings this week have failed to conclude on a deal.

Key elements such as fishing and state aid have not been agreed, with both the EU and the UK refusing to make concessions.

The EU has now offered to extend talks by several more weeks, leading the negotiations well into November – only a month and a half before the transition period ends.

The EU’s chief negotiator Michel Barnier said the EU was ready to accelerate talks from Monday for the “two or three weeks that remain before us”.

The Prime Minister has responded to the EU’s offering, saying: “From the outset we were totally clear that we wanted nothing more complicated than a Canada-style relationship based on friendship and free trade.

“To judge by the latest EU summit in Brussels, that won’t work for our EU partners.

“They want the continued ability to control our legislative freedom, our fisheries in a way that is completely unacceptable to an independent country.

“And since we have only 10 weeks until the end of the transition period on January 1, I have to make judgment about the likely outcome and get us ready.

“And given that they have refused to negotiate seriously for much of the last few months and given that this summit appears explicitly to rule out a Canada-style deal, I’ve concluded that we should get ready for January 1 with arrangements that are more like Australia’s based on simple principles of global free trade.”

While it currently looks likely both sides will agree to extend the talks for several more weeks following an offer from the EU made today, a no-deal Brexit is still a likely scenario.

Compounded with the horrific economic effects of the coronavirus pandemic, the UK is looking at a difficult road ahead throughout the new year.

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How much will no deal Brexit cost?

Laurence Boone, chief economist at the Organization for Economic Cooperation and Development, said in a report this week: ”The combination of COVID-19 and the exit from the EU single market makes the UK outlook exceptionally uncertain.”

“Actions taken to address the pandemic and decisions made on future trading relationships will have a lasting impact on the United Kingdom’s economic trajectory for years to come.”

Citi and IFS have estimated the UK economy will contract by 9.4 percent this year, according to the Bank of England.

Additional restrictions coming into place this week are likely to make this worse – and a chaotic break from the EU is likely to prolong the recovery period from COVID-19 overall.

According to economists at Citi and IFS, even the best-case scenario of a limited trade agreement would leave the UK economy 2.1 percent smaller in 2021 than it would have been if the transition period was extended indefinitely.

Considering all of this, if the UK were to walk away empty-handed this December, it could shave more than £19billion off the UK economy next year, according to research by CNN Business.

What happens if we go out with no-deal?

Abrupt and major changes will take place immediately in the event of no-deal.

If a deal between the EU and the UK is not brokered before the transition period ends in December, then the UK will drop out of both the customs union and the single market – putting significant tariffs on goods entering and leaving the UK.

Other important matters such as cooperation on security and terrorism, education and science risk being left up in the air if no detailed agreement is reached on future EU-UK relations.

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