If Theresa May fails to get her deal through parliament in January, the prospect of the UK leaving the EU without a deal becomes more likely. Here, Guardian journalists examine what a no-deal Brexit could mean for the country, sector by sector.
British and EU nationals
In a no-deal scenario, the rights of British nationals in Europe to work and reside there will fall away unless a member state has contingency plans in place. For this reason many Britons have taken the precaution of becoming citizens of the countries in which they are settled.
In its latest no-deal planning paper, published this month, the European commission urged member states to take a “generous” approach to protect the rights of 1 million Britons living in the bloc. It said governments should consider granting temporary residence permits to allow time for people to make applications to secure their long-term status.
Campaigners say the EU’s decision to leave the issue of citizens’ rights up to individual states means the 3.5 million EU citizens living in the UK and the 1 million Britons in Europe have been “abandoned”.
Jane Golding, the chair of the campaign group British in Europe, said: “We are appalled to learn that, while aviation and financial services merit an extension of current agreements in the case of no deal, people do not. This means that there will be no soft landing for over 1.2 million British nationals living on the continent who will have to adjust to life as third-country nationals overnight once all their EU rights have been stripped from them.”
Some countries have already announced advanced no-deal plans to protect British nationals. Nathalie Loiseau, France’s Europe minister, said France would guarantee the residence, employment and welfare rights of the 160,000 resident British citizens living there, provided Britain offers the same guarantees to French nationals.
Theresa May has said EU citizens settled in the UK will be free to remain. However, some of their rights, including the rights of elderly parents to move to the UK to live with their children, will be diminished.
It is difficult to see how ports could continue functioning as before even if the government’s no-deal plans swing seamlessly into place in March. Authorities in France have said even a two-minute delay in Calais would lead to 16-mile queues in both countries. The Road Haulage Association (RHA) recently said the government was “in denial” over no-deal preparations.
As it stands, hauliers entering the country will be required to submit a 40-section declaration form per consignment. “The form takes 10 minutes to fill out. If you take a large retailer who has 8,000 consignments [in one lorry], that would take 170 people eight hours to process one trailer,” said Richard Burnett, the RHA’s chief executive.
Even if the UK decides not to impose checks, they will be mandatory in the other direction. Regional authorities in Hauts-de-France, which includes France’s largest passenger port, its biggest fishing port and the country’s third biggest cargo port, and Kent county council have advanced plans to try to mitigate the catastrophic impact that would have on both countries’ economies.
Xavier Bertrand, the president of regional council of Hauts-de-France, said temporary border inspection posts for food controls would be in place for April and recruitment had begun for the first batch of 250 customs officials.
In Dover there is no room for border inspection posts. Kent county council has warned of the chaos that could ensue, affecting the ability of schools, hospitals, morgues and waste collectors to function normally. Paul Carter, the Conservative leader of the council, has said no-deal could cause gridlock at Dover and spread chaos around the country at a cost of almost £1.75bn a week to the economy.
The council has contingency plans in place, including facilities at Manston airport to act as a holding pen for 5,000 to 6,000 lorries. However, it says a national plan is needed to ensure lorries stay in depots further north until they are called to join the queue at the airport for Dover.
Farmers and food producers are among the most vulnerable businesses in a no-deal scenario. First, the supply of seasonal harvest workers, mainly from eastern Europe, will dry up unless new immigration rules are brought quickly to the statute books.
Second, and perhaps of bigger concern to the National Farmers’ Union, is the devastating impact on meat and food exporters. Not only will they face World Trade Organization tariffs with the potential to make their products less competitive on the continent, but EU rules mean they could face a wait of up to six months before they are certified as approved exporters to member states.
The NFU says it has been told informally that although the UK is in complete regulatory alignment with the EU, if there is no deal, British producers will be subject to the same health checks that suppliers from countries such as China and the US undergo.
It has been told that 6,000 meat processing plants that export to the EU will have to undergo individual audits by British authorities. These will then be checked by EU officials and put to a standing veterinary committee for approval, a process that the NFU has calculated will take six months “at a conservative reading”.
Abattoirs are also facing a shortage of official state vets, 95% of which are foreign, mainly from the EU, according to the British Veterinary Association (BVA). It said the proposed £30,000 salary threshold for EU workers could lead to “a near-total wipeout” of vets in critical public health roles in UK slaughterhouses.
Hotels, pubs, cafes, restaurants and other venues face a double whammy from no-deal. Not only do they heavily rely on EU citizens to work in their kitchen, front-of-house, service and cleaning roles, but they will also, like the rest of the nation, face a potential increase in food prices.
Neil Carberry, the chief executive of the Recruitment and Employment Federation, said hospitality would be heavily hit by immigration plans. A recent survey showed 42% of employers said they had not been able to find enough workers to fill all their seasonal or temporary vacancies, he said.
UK Hospitality’s chief executive, Kate Nicholls, said the £30,000 minimum salary proposed by the government would “shrink the talent pool and hit every aspect of hospitality from hotels, restaurants and bars, to the cost of people’s morning coffee”.
Keeping supermarket shelves full and food prices down will be one of the biggest challenges faced by retailers in the days after a disorderly Brexit. The country’s frozen and chilled food warehouses have been maxed out by worried store chiefs stockpiling staples such as bread, pizza, butter and potatoes.
Given that 70% of food imports come from the EU, the potential perfect storm of increased tariffs, delays at ports and a sharp fall in the pound is expected to stoke food price inflation.
“Failure to reach some sort of agreement could see retailers face an average food tariff increase of up to 22%, particularly in dairy, meat, vegetables and fruit,” said Thomas Brereton, a retail analyst at GlobalData. “Although retailers and suppliers would bear much of this price increase, consumers would almost certainly see shelf prices rise in these categories and overall food and grocery inflation would rise to 4.5% – the highest in a decade.”
In September Next’s chief executive, Simon Wolfson, suggested queues and delays at UK and EU ports would be one the biggest problems faced by clothing chains if the need for increased customs declarations created a logjam. Clothing prices could also rise if another currency shock pushes up costs for retailers which import goods in dollars.
“It is not yet clear how well prepared HMRC systems, customs and other relevant personnel will be for the upcoming potential increase in workload and data capture,” said Wolfson, a prominent Vote Leave supporter.
Retailers will also have to grapple with labour shortages, which could push up their wage bills. In 2017 the British Retail Consortium estimated that 6% of the retail workforce was made up of EU workers, with many working behind the scenes in warehouses and distribution roles.
Manufacturers account for a tenth of annual British output and are among the most exposed to Brexit turmoil if the UK leaves the EU without a deal. Many industrial firms rely on imported parts made in Europe, and the threat of chaos at Dover is forcing them to make contingency plans. Some parts cross the Channel multiple times before being installed in cars or aircraft.
Rolls-Royce, the aircraft engine maker, is stockpiling parts and moving some regulatory approvals to Germany. More than 200 UK aerospace manufacturers have applied to come under the jurisdiction of regulators in other EU countries in preparation for a possible hard Brexit.
For carmakers, a major part of the UK manufacturing base, their contingency measures may need to be more drastic. BMW has talked of moving its Mini plant from outside Oxford to the Netherlands, while there is speculation that Nissan might move production from Sunderland to France. Temporary factory shutdowns across the UK, including Jaguar Land Rover in the West Midlands and Honda in Swindon, are also being mooted.
If the “just in time” supply chains used by manufacturers stretch or break because of delays at ports, it will be costly. Airbus has said just a week’s delay would cost €1bn, while smaller manufacturers are scrambling to secure loans from banks for extra working capital as they stockpile.
Financial services and the City
A no-deal Brexit would leave Britain’s financial services sector without a replacement for passporting rights, meaning banks would be blocked from selling their services freely across EU borders.
In the UK, European firms will be able to continue operating while they apply for local licensing but there will not be a similar deal for British firms. There is no sign of that temporary relief being reciprocated for UK firms that have clients in the EU.
Most UK-based banks and insurers have been planning for the worst-case scenario from the start. This has meant applying for EU licences, putting UK employees on standby for relocation to mainland Europe, and hiring a raft of new workers for new or expanded EU operations.
John McFarlane, who is chairman of both Barclays and the lobby group TheCityUK, said this month: “Every single large bank is prepared to move by March if they have to.”
Energy would almost certainly keep flowing across the undersea links between the UK, France and the Netherlands in the event of a no-deal Brexit. However, industry insiders have said no-deal would introduce more friction in electricity trading. The impact could be much more serious in the case of Northern Ireland as internal government documents suggest it could face blackouts while new cross-border arrangements are drawn up.
Leaving without a deal would mean the UK crashes out of the EU’s flagship climate programme, the Emissions Trading System. The Treasury has said it would impose a unilateral carbon tax on electricity generators to compensate for the exit. No-deal would therefore mean some modest relief for coal and gas power station owners, because the UK plans a charge of £16 per tonne of carbon, versus the current €23 per tonne under the EU scheme.
However, no-deal would pose headaches for the nuclear sector, both in terms of freedom of movement for skilled workers and the transport of nuclear materials across borders. Research into nuclear fusion, in which the UK is considered a world leader, would also be hit.
Airlines have been reassured by a pledge of an immediate bare-bones deal for EU-UK flights, which would last for at least a year.
The Association of British Travel Agents and the government have been keen to counter reports that holidays could be jeopardised by a no-deal Brexit. Britons will not have to pay for a €7 visa for EU trips until 2021.
Eurostar has said it is working closely with government to ensure a bilateral agreement is signed allowing it to continue services after March, and is confident it will maintain its existing timetables.
Hauliers have been applying to enter a lottery for clearance to operate in Europe, known as ECMT permits, which would allow a limited number of firms to keep trading abroad. EU proposals to extend the movement of goods until December 2019 have taken some pressure off, but they have not been ratified and also would not necessarily permit UK firms to operate between EU countries or to travel to countries beyond.
Given the NHS’s pivotal role, its preparations for minimising the effects of a no-deal Brexit are among the most advanced, and most dramatic, of any area of national life. Mark Dayan, a policy analyst at the Nuffield Trust health thinktank who has researched the subject extensively, said “a large degree of chaos” would inevitably befall the health service under no-deal.
The Department of Health and Social Care’s 33 pages of guidance, sent to NHS bodies in England in December, outlines key areas that no-deal contingency planning has been focusing on. Among the key worries is inability to access medicines. Drug companies have thus been ordered to build up stockpiles of extra medications, enough to last six weeks. The department is meanwhile helping companies pay for the storage space needed. Matt Hancock, the health and social care secretary, said last week he had become “the largest buyer of fridges in the world”.
Hancock is also chartering a plane to fly in important medical supplies that have a short shelf life, such as radioisotopes used in cancer care and gene therapies.
NHS bosses fear the impact of any form of Brexit, but particularly a no-deal version, on their vital supply of staff from the EU.
All told, a no-deal Brexit would add £2.3bn to the NHS’s annual running costs, Dayan has calculated. That includes a £1.75bn hike in the price of medicines. “Given all this would come immediately after another winter of financial pressure and strained bed capacity, we would expect the months around a no-deal Brexit to be among the most difficult in the 70-year history of the NHS,” he said.