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UK exporters face £6 billion in extra costs in Brexit deal

6th March 2017

Brexit negotiations

British exporters could face up to £6 billion a year in extra costs if the UK leaves the European Union without a trade deal, according to a recent article in The Guardian.

Despite Theresa May insisting that “no deal is better than a bad deal”, analysis suggests that UK negotiators have limited options at this stage, with just a few weeks before Brexit talks begin. The article by The Guardian suggests the prime minister believes falling back on the World Trade Organisation is a credible alternative if a new free trade agreement cannot be made. However the implications of this back-up plan are still unknown.

Without EU cooperation, the cost of Theresa May’s “no deal” is clear, according to The Guardian, which has analysed the latest international trade figures by the UN and World Bank. Their research reveals that the $204 billion-worth of British goods bound for Europe each year would be hit with $7.6 billion in new tariffs under the current World Trade Organisation rules, equivalent to $6.1 billion in today’s exchange rate.

Professor Alan Winters, director of the UK Trade Policy Observatory at Sussex University, told The Guardian: “This would be a pretty big shock and it’s very clearly unwelcome. At the end of the two years, it’s up to the Europeans to decide if we have a deal. The government has got to pretend that it is okay if we don’t, otherwise they have no leverage. This is a piece of political spin to try to persuade us that if this happens, it is not a catastrophe.”

Agriculture and car manufacturing sectors would be worst hit, according to the report. These industries currently enjoy tariff-free trade with the EU, but would be lumbered with tariffs from 10% for cars, 16% for lorries, 23% on ham and 109% on sugar beet. John Springford, director of research at the Centre of European Reform, said: “I doubt UK farmers know what’s coming. There is a real risk for the average British farmer that they could be dealing with much worse trading terms.”

Though many attempts have been made to estimate the bill for a hard Brexit, The Guardian’s analysis examines the total impact across 4,500 separate lines of trade, revealing new potential casualties. These include the British fashion industry, which faces an additional customs bill of more than $1 billion, and Stoke-on-Trend’s ceramics industry, which also faces high tariffs.

A Downing Street spokesperson said Theresa May was “focused on securing the best trade deal possible” and the government remains confident it can avoid this scenario by persuading its EU counterparts that they have even more to lose by not agreeing a free trade deal.

Those in legal roles in the UK have already been battling with the effects of Brexit, but will have to wait until formal negotiations begin to get a clear idea of the full impact of leaving the EU.