The trade costs of a "no deal" scenario

In July 2017, the CBI called for agreement as soon as possible on transitional arrangements to govern UK-EU trade in the period between the end of the Article 50 process in March 2019 and such a time as a new deal comes into force. It is vital for British business to avoid a regulatory “cliff-edge”, where UK trade with EU suddenly defaults to a WTO framework, implying a return of tariffs and a host of other barriers to trade. The simplest way of achieving this bridge to a new relationship with the EU, will be for negotiators to agree that the UK should remain in the EU single market and customs union until a new deal is in force. This period should be short as practically possible: two to three years could allow sufficient time to get the final deal right, including agreement on a longer implementation phase for sectors that need more time to adapt.

This briefing sets out evidence on the scale of barriers to trade in different sectors, to highlight the potential costs of leaving the EU with no deal in place, but also of securing a more limited trade deal over the long-run. The starting point is a discussion of the UK’s relative strengths in European trade, to highlight what’s at stake and the kind of trade-offs the UK may be facing during negotiations on a FTA.