UKTPO Briefing Paper: Deal or ‘No Deal’? The Economic Consequences of the UK’s ‘No Deal’ Tariffs
The aim of this latest Briefing Paper for the UKTPO, ‘Deal or ‘No Deal’? The economic consequences of the UK’s ‘No Deal’ tariffs‘, is to assess the possible consequences of the Government’s proposed No Deal tariff regime. While there have been numerous previous assessments of the economic impact of a ‘No Deal’, the tariff proposal by the UK Government provides a new set of tariffs which have not been assessed in the existing empirical literature.
Specifically, this Briefing Paper aims to:
- Explain carefully the Government’s proposals and identify how much of UK trade would be affected by the changes in tariffs in a ‘No Deal’ scenario;
- Provide an empirical assessment of the scale of the economic challenge which could face UK industries in the event of ‘No Deal’.
The authors find that a ‘No Deal’ Brexit will pose a significant challenge to the UK economy with a negative impact on output, exports and imports driven largely by the increased cost of trading with the EU.
Furthermore, the results highlight that in the event of ‘No Deal’ the Government’s room for policy manoeuvre is somewhat limited. While it can lower the UK’s import tariff, it cannot impact on the tariffs UK firms will face on exports, nor can it do much to resolve the potential increase in regulatory barriers to trade. Moreover, if the Government chooses to lower tariffs in the event of a ‘No Deal’, even on a temporary basis, this may make negotiation of free trade agreements with future partners more difficult.
Prof. L. Alan Winters
Director of UKTPO
Professor of Economics, University of Sussex