What A 'Hard Brexit' Would Mean For European And U.S. Economies
ARI SHAPIRO, HOST:
So what would a hard Brexit mean for British and European economies? George Parker has written about this. He's a political editor at the Financial Times joining us from Brussels, where he is following those negotiations. Welcome back to the program.
GEORGE PARKER: Hello.
SHAPIRO: If there were to be no deal at all, what immediate changes would take effect on March 29 when the U.K. leaves the EU?
PARKER: Well, they could be quite severe. It all depends a bit on what kind of no deal we actually end up with. If it was a totally chaotic and acrimonious no deal where everybody ended up throwing plates at each other and Britain left the EU in very bad dodging indeed, then you could see some very serious impacts of the border. So you would have - immediately you'd have checks on all goods coming in and out of the U.K., which doesn't happen at the moment. That would quickly lead to huge queues at the ports coming into Britain. And very quickly the companies in Britain which rely on a seamless flow of goods across borders in Europe - they would run out of parts. Factories would close down.
And the Bank of England has forecast this could be actually a very chaotic and damaging episode for the British economy, which could last for months. There's all sorts of contingency planning going on the U.K. in case this happens - talk of stockpiling of medicines, fears that fresh food could run out very quickly. There are ways you could try to mitigate the effects of that by having some sort of informal agreements. But nevertheless, if there's no deal at all, it will be quite bad. And the British economy will take a very big hit.
SHAPIRO: So you are saying that in the worst-case scenario, there is a lack of food on the shelves, a lack of medicines in pharmacies.
PARKER: Yep. I mean, there's been some sort of stockpiling some certain types of medicines. Once you introduce border checks to the place where there are no border checks at the moment, you can have queues running back for miles and miles and miles - 20-, 30-mile queues. Things just wouldn't be coming through. So there are concerns that there will be shortages, certainly in more distant parts from the ports. So a pretty serious set of scenarios are being considered by ministers.
SHAPIRO: When you look at the longer-term economic impacts, what's the best sense people have of what the effect would be?
PARKER: Well, the Treasury - the U.K. Treasury has made an estimate of what would happen in the medium term if Britain was to leave without a deal. And that would basically - once the initial shock had passed, you would end up with just a lot more bureaucracy and red tape at the borders. And that would add to business costs. It would make Britain a less attractive place to invest because of - you'd have less access to the European market and the potential for tariffs as well.
So the U.K. Treasury's estimated that within about 15 years, the U.K. economy will be about 8 percent smaller than it otherwise would have been the case, which is a pretty big hit. It's a bit like sort of an aircraft gradually losing height. You wouldn't necessary notice immediately. But over time, Britain would be a poorer place than otherwise it would be.
SHAPIRO: So if those are the potential consequences for the U.K., what about for the rest of Europe if the U.K. leaves without a deal?
PARKER: Well, for the rest of Europe - this has always been something that the Euro-skeptics and Britain have clung to - the idea that Europe wouldn't allow such a scenario to play out because Britain is a major destination for European exports. So there would be an effect on all manner of European producers, whether it's - I don't know - wine producers in France, car producers in Germany. You name it. They will be affected because the U.K. after Brexit will become the biggest single export destination for all the other European Union countries. But the point is it's an asymmetric shock. Whilst it's true that other European countries would suffer as a result of no deal, the biggest losers will be the U.K.
SHAPIRO: The Brexit vote was more than two years ago, and here we are less than six months from the deadline. Does the idea of going crashing out without a deal now seem almost inevitable? Or is this the sort of thing where you're only going to get a deal when you're pushing right up against it?
PARKER: I think it's more the latter to be honest. I mean, we aren't quite at the wire yet. So I think the wire will be really just before Christmas this year. So there's another couple of months to go. The differences between the two sides are not really as big as they are often presented by the politicians. There is another potential problem, which is that if Theresa May, the British prime minister, does a deal in Brussels, she then has to sell it to her very divided party back in London.
And I think actually negotiating a deal inside the British government could actually be harder than negotiating a deal with our European partners. So anything could happen. But I think my base assumption still, despite all the negative noises around, is that common sense will prevail, and there will be a deal at the end of the day.
SHAPIRO: George Parker is a political editor of the Financial Times. Thanks for joining us as always.
PARKER: A pleasure.
(SOUNDBITE OF NUBYA GARCIA'S "LOST KINGDOMS") Transcript provided by NPR, Copyright NPR.