Many are predicting that there will inevitably be a ‘no deal’ Brexit focusing attention on the contingency plans announced in August. Others cling to the hope that there will be a second referendum where people will call a halt to Brexit and return to the EU fold. The Labour Party are now flirting with the potential of a second referendum and there are active campaigns by Remainers across the spectrum.
In reality with just six months to go until Britain is due to leave the EU all options are still possible. There is clearly advantage for both the UK and the EU if an agreement can be reached, but the risks of a ‘no deal’ exit are real and the pressure to think again can only grow as uncertainty continues. With the political stalemate in a divided British parliament and the stubborn intransigence of the EU negotiators, who seem determined to protect what they consider to be fundamental principles of the EU, the way forward is unclear! The Irish border seems to be the source of many problems and to be leading to the tail wagging the dog.
So what are the consequences of a ‘no deal’ Brexit?
- Transition period – The transition period during which the UK are to continue to follow EU rules is due to run from the Brexit date of 21st March 2019 to 31st December 2020 to allow time for the arrangements to be put in place to allow for a smooth exit. In the event of ‘no deal’ the transition period would also not be agreed creating the potential for an abrupt end to the agreements currently in place. The only hope would be that the ‘no deal’ could include an agreement to continue with the transition period to prevent this ‘cliff edge’ Brexit, but given ‘no deal’ would imply a breakdown in relations there is no guarantee.
- Disruption at ports and airports – The need for customs and regulatory checks at ports would lead to major disruption and delays. As the planned lorry parks in Kent will not be ready by March the government have proposed using the motorways instead, which would result in major delays for passenger traffic as well as commercial traffic.
Leo Varadkar, Prime Minister of Ireland, pointed out that planes leaving the UK could be prevented from using Irish airspace and clearly this could be the position across Europe.
- Right to remain – The Independent in a recent article said that this would mean that British citizens living in the EU and EU citizens living in the UK would have no legal status. The British government has indicated that it would allow EU citizens already in the UK to remain with their existing rights intact even in the event of a ‘no deal’. The EU have made some positive noises, but no guarantee has yet been given by the EU. The underlying reality is probably that it is difficult to believe that Spain and other countries with significant British populations would allow such a position to prevail as a mass exodus plus any impact on tourism would be very damaging for their economies. It is, however, not satisfactory that the uncertainty continues at this late stage.
Jason Porter, Director of Blevins Franks says that if you are thinking of moving to an EU country by the date the UK formally leaves the Union – 29 March 2019 – then you should start your residency and financial planning now.
‘It can take up to six months to obtain residency cards in the EU destinations favoured by the British, such as France, Spain, Portugal and Cyprus,’ says Porter. ‘To be sure everything is in place by next March – six months away – the process to gain resident status of your new country should begin now.’
- Healthcare – No deal would also mean that British citizens access to healthcare and other benefits would potentially be restricted. Private healthcare policies would become increasingly attractive and potentially essential.
- Financial Services – In an article in the Express James Green of the deVere Group was quoted as saying:
‘If the UK crashes out of Europe with no deal in place, the estimated 1.8 million expats living in the EU could be financially impacted in two key ways.
‘First, the pound would inevitably suffer and it could fall hard. This would deliver another heavy and serious blow for those who receive UK pensions or income in pounds as the cost of living, in effect, would be significantly more expensive.
‘Second, unless there is considerable post-Brexit collaboration between the UK and the EU there is risk that existing payments from British companies, including pension and insurance companies, to those living within the European Economic Area (EEA) could be disrupted or even made impossible. Of course, this would be a major inconvenience to many UK expats.’
Dominic Raab, the Brexit Secretary, said this payments problems is ‘an issue we ought to be able to resolve’ and that he expected ‘the kind of practical cooperation to make sure that contractual issues, whether pensions or otherwise, are navigated through.’
- UK State Pensions – The reciprocal agreements on social security between the UK and EU has meant that pensions increase in line with inflation for pensioners living in the EU as if they were living at home. In the event of no deal, the arrangements could match those of British pensioners living elsewhere where the state pension is frozen from the point of leaving the UK. The impact over a period, especially if there is an increase in inflation rates can be very significant placing further pressure on British expats’ finances.
The impact of ‘no deal’ could be significant both for British citizens living in the EU and for those still living in the UK. With time running out there is nothing that has given us faith that the two sides will not allow this drift to disaster continue. However, there must remain a good chance that if no overall deal is possible, there will be compromises that will allow short term arrangements to be put in place to alleviate the worst consequences.