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Summary
- Make UK, the manufacturing trade body, has slashed its growth rate forecast from 5.1 per cent to 2.7 per cent for 2021
- The body has said that the trade deal is important for businesses as it will ensure tariff-free movement of goods across borders.
As the UK and EU make best efforts to clinch a Brexit deal, Make UK has stated that in the absence of a trade deal, it will render a big knockout blow to the sector. The trade body has slashed the growth forecast for the sector from 5.1 per cent to 2.7 per cent, which is almost half what it had predicted three months ago.
The Knockout Blow
When the European Common Economic Area regulation ceases to apply to the UK on 31 December, several things will change. After the tariffs go online from 1 January, there would be various implied costs that will have to be borne by both sides.
If there is no deal, tariffs will be applied to most goods which UK ships to the EU. This means the UK goods will be more expensive and harder to sell in Europe as other countries will look for cheaper imports from other countries. Similarly, the UK can also reject EU goods for cheaper ones with trade deals with other countries.
Besides, there will be more expenditure on additional customs personnel and infrastructure set up that will be required. There will be a lot of paperwork that would need to be processed on a daily basis. This will obviously push up the cost of doing business.
Costs of a no-deal Brexit
Brexit will lead to a massive economic fallout, where some experts are saying that the magnitude is beyond knowledge and calculation. While the UK is part of the EU, it is also part of about 40 trade deals which the EU has secured with 70 countries. This is almost 11 per cent of the total UK trade, as estimated in 2018.
With the new trade arrangement, 27 of these existing deals with 57 countries or territories have been rearranged and will start on 1 January. The latest deal was signed with Singapore on 10 December. Some talks are on with Vietnam and Mexico.
But the basic negotiation process took a very long time, and until 2019 it had been stalled many times before Prime Minister Boris Johnson came to power promising a withdrawal with or without a deal. The process of withdrawal was completed on 31 January 2020, but additional time was allocated to settle the trade deal, after which the new tariffs as per World Trade Organisation terms would come into play.
