A “no-deal” Brexit would be a big step down and would hit Britain harder than the European Union, a former World Trade Organisation (WTO) deputy director general has said.
Roderick Abbott said the tariffs that would be imposed on trade if there was no exit agreement would favour the EU as it does a larger share of its business with the rest of the world, whereas nearly half of Britain’s international trade is with the union.
Theresa May is facing pressure from some Tories to leave the EU without a trade deal so Britain can free itself from Brussels regulations, avoid a costly “divorce bill” and take what some see as full advantage of the benefits of Brexit.
Reports suggest the Government may use the coming weeks to step up preparations for a “no deal” Brexit in order to force the EU’s hand in negotiations by showing the UK is ready to leave without a trade agreement, in the hope that it could lead to a more favourable outcome including fewer concessions on an exit payment.
But Mr Abbott said the UK could stand to lose out from leaving with no deal and reverting to WTO rules to govern international trade after Brexit.
Discussing a “no deal” Brexit, he told BBC Radio 4’s Today programme: “What has happened is, you are out of a preferential relationship with the EU, including all of the regulations of the single market which you are inside.
“And on the tariffs level you are losing all of your preferential access to the EU and to all of the countries which the EU has trade deals with, so that’s quite a big step down.”
Asked if erecting tariffs on EU goods and services would favour the UK because it would take in more money than it pays out, Mr Abbott replied: “Yes, and on the other side, if you’re talking cost, your exports might actually drop quite substantially, so your revenue from that is falling.
“I think that the tariff argument is in the favour of the EU because they are selling more to the UK than in any other direction, but as a proportion of their total trade around the world it’s quite small.
“Whereas, the proportion of our trade to the EU is 45%.”
Meanwhile, former head of the Civil Service, Lord O’Donnell, warned that banks would leave the UK if there was no deal.
He said Catalonia’s current bid for separation from Spain provided an example of what will happen. Banks and other firms have already confirmed their intentions to move their headquarters out of the region amid a stand-off with the Spanish government.
Lord O’Donnell told the programme: “In practice, we have a live example in Catalonia.
“They are voting on independence and you can see companies moving their headquarters out, banks moving away from Catalonia, because if they were to go independent they would leave the EU with no deal and most of their trade is obviously with the rest of Spain.
“That will be in doubt.”