Boris Johnson is urging the nation to prepare for a no-deal Brexit, as the prospect of a free trade agreement with Brussels looks increasingly gloomy.
While the government has issued guidance in certain areas, it is still unclear how the majority of us can best prepare for the impact of leaving the EU without a trade deal.
So, given what we know, here are some of the main ways we can expect a no-deal Brexit to affect us.
How will food prices and availability change?
The first time most Britons will probably experience the material impacts of Brexit will be when they go shopping.
Some 45 per cent of the UK’s food is imported, with 26 per cent coming from the EU, making the UK’s supplies vulnerable to border disruption, which the government admits is likely – particularly given some 200 million customs declarations will be required each year.
In the event of no deal, tariffs averaging 18 per cent will be imposed on food and drink from the bloc, which – assuming around a quarter of the items in each shopping basket were affected – would see weekly shopping bills of £45 rise by around £2.
In total, the British Retail Consortium expects the annual hit to supermarkets and their customers from no-deal tariffs to reach £3.1bn.
These import taxes are expected to particularly impact fresh food, such as fruit and vegetables and meats, including 48 per cent on beef mince, 16 per cent on cucumbers, 10 per cent on lettuce and 9 per cent on tomatoes.
Meanwhile, former Tory cabinet minister Damian Green has warned that continental hauliers could opt to “give Britain a miss for the first couple of months” in order to avoid queues, disruption and red tape.
“That could obviously lead to a threat of shortages of parts for manufacturing and even possibly of food and so on,” he said.
What impact would no-deal have on our personal finances?
The UK’s parliamentary fiscal watchdog, the Office for Budget Responsibility (OBR), has calculated that crashing out of the EU without a deal would cut the UK’s GDP growth by around 2 per cent in 2021, equating to roughly £40bn.
This translates into a loss of £1,500 per household.
In the longer-term, the OBR estimates the damage would hit 6 per cent of GDP over 15 years, equating to around £120bn – or £4,000 per household.
According to The Independent’s economics editor Ben Chu, it’s “impossible to say precisely which households would suffer because this would depend on which sectors people work in and the decisions of future politicians about benefits and taxes”.
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He said: “Yet this is a rough indication of the size of the economic pain that would be borne – in some way – by the average UK household.”
What will happen to house prices and mortgages?
While the Royal Institution of Chartered Surveyors’ (RICS) latest survey found some surveyors fear a no-deal Brexit could negatively impact the housing market, it’s difficult to predict whether house prices will fall as a result – particularly given their relative robustness in the face of the economic fallout caused by the pandemic.
In terms of mortgages, The Independent has previously reported that financial markets are currently pricing in the Bank of England cutting interest rates below zero in the coming months to help support the economy.
While negative interest rates probably would not result in a fall in average mortgage repayments from their current ultra-low levels, it would ensure they didn’t rise – and could help in a small manner to cushion the blow of other economic impacts for some households.
How will no deal affect employment?
The OBR forecasts that around 300,000 jobs will be lost next year, relative to otherwise, if the UK fails to agree a trade deal – with the losses largely felt in sectors heavily reliant upon EU trade.
With the UK currently exporting some 50 per cent of its manufactured cars to the bloc, no deal would be particularly severe on the automotive sector, which would be hit with 10 per cent tariffs on car sales.
Many exporting firms would also face EU tariffs, making those exports less competitive and more likely to reduce demand for them, with a likely knock-on effect for employees’ wages and job security.
And researchers at the Institute for Fiscal Studies calculate that the economic hit from no deal is likely to disproportionately affect workers in lower-skilled roles.
“These tend to be older men with skills specific to their occupation who, history suggests, may struggle to find equally well-paid work if their current employment were to disappear,” they note.
It is also worth noting that while the coronavirus pandemic has dealt a heavy blow to the UK’s services and hospitality sectors, the OBR expects that several industries more resilient to lockdown and health restrictions – such as manufacturing, financial services and agriculture – are set to fare worse in the event of no deal.
