Potential Consequences of a “No-Deal” Brexit

As negotiators are still running against the clock with the end of the transition period around the corner – and the deadline to reach an agreement coming even faster – now is the time for businesses to accelerate preparations for the future relationship between the UK and the EU, whatever it might look like. The negotiations have not seen much progress, despite recent intensification, and both parties have repeated that they are ready for a “no-deal” scenario. What would be the consequences of a no-deal Brexit? What would happen if no agreement is signed by 31st December 2020?

The United Kingdom officially left the European Union on 1 February 2020 but entered a transition period during which the UK is still part of the Single Market and Customs Union.

In November 2019, the EU and the UK have signed a first Withdrawal Agreement. This agreement settles the UK’s financial obligations (or so-called “divorce bill”), the status of citizens in the UK and the EU and arranges how goods trade between Northern Ireland and the EU would continue after Brexit. This agreement is not a trade deal and has little bearing on what a possible future agreement would look like.

Trade between the EU and the UK is significant, with the EU27 being the UK’s most important trading partner. In 2019, the rest of the EU had exported to the UK £372 billion of goods and services, and the UK had exported goods and services to the EU worth £300 billion.

The consequences of a no-deal Brexit

The UK will, no matter what, leave the Single Market and the Customs Union on 1st January 2021. Without a specific Free Trade Agreement, EU and UK trading relations would fall under “WTO terms”. The World Trade Organisation sets rules on international trade which all members must follow. WTO terms are the basic trading terms that can apply. Without an FTA with the UK, this will lead to the re-establishment of tariffs and non-tariff barriers and, for example, the loss of preferential access to the EU market.

Therefore, if an agreement is not found before the end of the transition period, from 1st January 2021, UK goods and services being imported in the EU would face the Union’s existing external tariffs for “third countries”. Reciprocally, the UK would also have to apply tariffs to EU goods entering the UK. In anticipation, the UK has adopted new “Global Tariffs” which will be imposed from 1st January 2021 to all countries with which it does not have trade deals.

Additionally, quotas restricting the number of goods allowed to be imported and regulatory barriers would also be applied. A whole new set of costly and time-consuming administrative procedures would also need to be complied with.

All these new barriers would have repercussions on the price of UK products sold in the EU, and vice versa. For example, the automobile industry estimates the application of the EU standard 10% tariff on imported vehicles would make UK imported cars about £1,900 more expensive.

One of the consequences of a no-deal Brexit is that the free movement would also come to an end, meaning that customs border checks would be imposed. This would put significant pressure on both British and EU businesses that are currently benefiting from unbarred trade and clear sets of rules. The UK Government is already anticipating significant lines and delays at border-crossing points. Truck drivers looking to cross over to France would also need a whole new set of documents to be allowed entry. This would impact industries relying on expeditive supply chains, such as the automobile or agri-food industries.

These new formalities would increase costs for businesses, which would impact the price of their products, and in turn, their competitiveness. This would be especially true for SMEs, which might not have the cash flow to sustain said costs.

How to mitigate the impact of a no-deal Brexit?

The Commission urges stakeholders to start preparing for the end of the transition period, under any scenario, as, even if a deal was to be found, significant disruption to trade would still appear on 1st of January. Although the consequences of a no-deal Brexit would be more impactful and far-reaching than in case of a deal, preparing for the UK’s exit in general will still help businesses and Member States bear the repercussions that the lack of agreement would have.

The EU Commission recommends companies to talk to their business partners, to contact local authorities and advice centres for further information and to consult EU Commission readiness notices.

First published while the EU and the UK were negotiating the Withdrawal Agreement, the readiness notices have now been updated by the Commission and cover over 100 sectors providing information on measures that should be taken by Member States, business and citizens in order to prepare for the UK’s exit, with or without a deal.

The Commission also prepared a checklist so business can make sure they have taken all the steps necessary to fully prepare.

Businesses that currently import or export goods from or to the UK should make themselves aware of rules applying to trade with third countries and obligations of importers or exporters, especially if they do not have experience trading with third countries.

With regards to customs formalities, checks and controls, the Commission also advises businesses to get acquainted with existing formalities and procedures for doing business with third countries. They should also assess the actions needed to mitigate the impact of increased administrative formalities and procedures, especially on supply chains.

All eyes on Berlin as Germany starts the Council Presidency

On 1 July, Germany took over the Presidency of the Council of the EU from Croatia, for the second half of 2020, which is already dubbed the ‘Corona-Presidency’. The upcoming six months will bring historic challenges as the management of the recovery from the current health crisis will coincide with some fundamental political choices in the EU, and the outcome will determine the future direction of European integration.

As one of the most powerful Member States of the EU takes over at this crucial moment in time, it will have to play multiple roles at the same time.

Crisis management

First and foremost, the German Presidency will have to play its role as ‘crisis manager’ in the context of the COVID-19 pandemic. Based on epidemiological developments and assessments, the German Presidency will seek to increase coordination in Europe to gradually return to a fully functioning Schengen Area. Furthermore, Germany is expected to lead the politically complicated negotiations on potentially expanding the list of third countries from which travel to the EU is allowed. These priorities will be central during the whole German Presidency mandate.

EU budget negotiations

Germany will also take an active part in managing the negotiations on the new Multiannual Financial Framework (MFF) 2021-2027 and the Next Generation EU Recovery Fund during the summer months. The main challenge will be to find common ground between the hard-hit Member States, such as Italy, Spain and France on the one hand, and the ‘frugal four’ – Austria, Denmark, the Netherlands and Sweden – on the other hand, with the latter group being against grants as part of the Recovery Fund. Germany will be directly responsible for the legislative work on the different sector programs within the MFF (e.g. Horizon Europe, Just Transition Fund and InvestEU) and the Recovery Fund, and will lead the trilogue negotiations with the European Parliament on the financial framework, once there is political agreement on the general features of the future budget. France and Germany expressed their ambition for a quick agreement by end of July, as European leaders are set to meet face-to-face on 17 and 18 July.

Brexit negotiations

With the Brexit transition period ending on the 31 December 2020 and the United Kingdom declining the opportunity to extend this deadline, the German Presidency will have yet another prospective challenge. Once an agreement has been reached at European Commission level, the Member States will have to give their consent. German EU ambassador Michael Clauss stressed that Germany will be exclusively focusing on “brokering agreements between the 27”.

The German Presidency program expresses the Presidency’s ambition for a comprehensive partnership between the EU and the UK. However, it also reads that the Member States will not accept an agreement that would distort fair competition within the Single Market. If there is an acceptable agreement before the end of the year, the German Presidency is expected to align Member States in its role as ‘Brexit-Broker’.

Work program

The work program sets out, in broad terms, the policy priorities for the second half of 2020. In general, Germany will prioritize the digital and green transitions throughout all of its activities. The German Presidency is committed to an innovative Europe based on three pillars: expanding the EU’s digital sovereignty, enhancing competitiveness and a sustainable and stable financial architecture. It will also ensure that the Green Deal’s implementation will contribute to the recovery from the COVID-19 pandemic in Europe.

The German Presidency will have an extremely challenging task of fostering European unity in the budget negotiations in the face of existing difficulties such as the COVID-19 crisis and Brexit. For more information on the German Presidency’s sector-specific priorities, please read our analyses of the German priorities in the fields of digital & tech, sustainability and transport:

Brexit: impact of the COVID-19 crisis and the latest negotiatons rounds

During the last two months, the world has come to a stop because of the worldwide COVID-19 pandemic. Trade negotiations have not been exempted, and the EU-UK negotiations have been severely affected. As the virus broke out in Europe, the EU’s chief Brexit negotiator Michel Barnier tested positive for the coronavirus and only a day later the UK chief Brexit negotiator, David Frost self-isolated, together with other key members of the negotiation teams. This obviously casted a shadow of doubt on the future of the negotiations, when expectations were already quite limited concerning what could be achieved in such a short amount of time.

Despite the major disruption, and the delay taken in the negotiations, the EU and the UK resumed the Brexit discussions on 15 April. During that call they agreed on negotiating rounds lasting a full week during the weeks of 20 April, 11 May and 1 June.

After the negotiations round of 20 April, Michel Barnier immediately expressed his disappointment regarding the progress of the talks, specifically on key issues such level playing field and fisheries. The UK, too, recognized the lack of progress on governance and level playing field and stressed that there cannot be any deal until the EU drops its insistence on imposing conditions on the UK which are not found in any other EU trade agreements.

Unfolding a blaming game between the UK and the EU, where Britain accuses the EU of treating the UK as “unworthy” partner in the negotiations, Michel Barnier blaming the UK for not being realistic and EU Trade Commissioner Phil Hogan adding that the UK would be ready to accept a no-deal, while blaming the failure to reach a deal on the impact of COVID-19 on the negotiations

However, according to Frost, a comprehensive free-trade agreement is within reach, alongside individual agreements on issues such as law enforcement, nuclear energy, and aviation. On 19 May the UK Government published 12 legal texts on several of the above mentioned issues which will be the basis of the last negotiations rounds in June, following the EU’s publication its own draft trade deal earlier this year.This new UK text appears to be both surpringly ambitious in certain areas (for example, equivalence provisions on sanitary and phytosanitary measures and technical barriers to trade) and less surprinsingly, lacking ambition on regulatory cooperation and level playing field.

Extension of Brexit?

As stated above, there will be only one additional negotiation round before the agreed high-level stock-taking conference, where the UK and the EU are supposed to determine whether enough progress has been made or if an extension to the transition period is required in order to reach an agreement.

Such an extension would have to be requested by the UK Government, and agreed by the European Council before 1 July. However, the UK has consistently made clear that it will not ask to extend the transition period as it would only prolong the negotiations, business uncertainty, and delay the moment at which the UK can take back control of its sovereignty.

With the lack of progress, how the events will unfold in the coming two months remain extremely uncertain, while pressure on both sides of the channel grow in favor of an extension.

Dr2 Consultants among top EU Public Affairs Consultancies in Brussels

Dr2 Consultants has been shortlisted among the top 60 EU Public Affairs Consultancies in the range of mid-to-large consultancies, published by Best in Brussels. With key sectoral expertise in digital & tech, transport and sustainability sectors, Dr2 Consultants has grown into a well-established consultancy firm and has experienced tremendous growth over the past years.

In 2019, Dr2 Consultants further expanded its client portfolio and grew its team of Public Affairs professionals who provide continuous guidance, support and strategic advice to our clients at both EU and Belgian level.

Furthermore, Dr2 Consultants opened two new offices, in New York City and in Copenhagen which, together with offices in Brussels, The Hague and Shanghai, form part of a network covering three continents and five countries.

In addition, Dr2 Consultants recently launched brand-new services:

  • the European Green Deal Impact Scan that helps companies identify risks and opportunities of new and existing legislation linked to the Commission’s European Green Deal initiatives.
  • the Brexit Office which offers support to organizations from local startups to European associations and corporations planning to settle in Belgium following Brexit.
  • the Dr2 Academy which provides tailor-made coaching for Public Affairs professionals and organizations about the skills and knowledge needed to be successful in the field of EU Public Affairs.

Read our full profile here and get in touch with us for more information on how we can support your business.


Brexit: Momentum? From a deal to elections

In the last two weeks, the Brexit debate has gained momentum. For starters, on 17 October the European Union and the United Kingdom reached an agreement on Brexit. The changes to the Withdrawal Agreement and the Political Declaration have been made in the context of significant developments in the Brexit debate: the removal of the backstop and the negotiation of a comprehensive Free Trade Agreement. Consequently, Northern Ireland will remain in UK customs territory, but the UK will be responsible for enforcing EU customs procedures. Furthermore, Northern Ireland representatives can vote on continuation of the special arrangement by simple majority 4 years after the end of the transition period.

After the European Council voted unanimously to accept the new deal, the UK Members of Parliament (MPs) gathered for the first time in 37 years on a Saturday to also vote on the new Brexit deal. However, the deal was pre-empted when MPs adopted the Letwin amendment, which requires the Prime Minister to ask for an extension, allowing MPs more time to pass the full Brexit legislation and properly scrutinize the deal. A few hours later European Council President Donald Tusk confirmed he had received three letters: a letter – that was, however, not signed by Boris Johnson – asking for an extension of the Brexit deadline until 31 January 2020; a second letter written by Sir Tim Barrow, the UK’s permanent representative to the EU, explaining that the first letter was required under the terms of the Benn Act; and finally a third letter from the Prime Minister, regretting the decision of the UK parliament to ask for a delay. The EU reacted that it will not decide on (the length of) a delay before the House of Commons discusses the new Brexit deal, but it is pretty sure that they will accept an extension.

House of Commons Speaker, John Bercow, ruled two days later, on 21 October, that he was not going to permit MPs to hold another vote on the Withdrawal Agreement and the Parliamentary Declaration that day. Instead, the House of Commons voted on 22 October on two other proposals. It first approved the Withdrawal Agreement Bill (WAB) in the second reading, a bill that passes the Withdrawal Agreement into UK law and  gives the government permission to ratify it. However, MPs then rejected the government’s proposed timetable, which would have required MPs to debate and sing off on the Bill in three days. The government’s defeat on the legislative timetable has important implications. First, it is now highly unlikely that the UK will exit the EU on 31 October, and second, MPs will now have more time to propose amendments to the Bill. Johnson decided, after the second vote, to pause the legislation “until the EU has made its intentions clear” regarding the extension that would be granted. At this stage, it is not yet clear if there will be a short delay or a long one, until the end of January.

In this turn of events, Boris Johnson indicated on 24 October that he wants to organize early elections on 12 December. In this way he wants to put extra pressure on the parliament to approve his Brexit agreement. However, the opposition only wants to accept new elections if the European Union agrees to a long delay for the Brexit. A vote on the elections will take place on Monday 28 October.

Time is running out because the new President of the European Commission, Ursula von der Leyen, said that the UK must name an EU commissioner to serve in Brussels if the EU grants a delay to the 31 October Brexit deadline.

Brexit: What after the prorogation?

On 16 September, Boris Johnson and Jean-Claude Juncker met for the first time in person since Johnson became Prime Minister. Both parties saw the meeting as an opportunity to take stock of the negotiations, but the Commission’s statement afterwards concluded that no concrete proposals emerged from the discussion. On the same day, the Prime Minister of Luxembourg, Xavier Bettel, called Boris Johnson’s approach to Brexit a nightmare at a press conference (which Johnson left early due to anti-Brexit protestors ruining it). Bettel also said the British government had not made any serious proposals for a new deal. Therefore Jean-Claude Juncker also repeated on 18 September, during the European parliament plenary session in Strasbourg, that a no-deal scenario is still very plausible.

However, a deal (or an extension of Article 50) seems necessary as the British government has been accused of minimalizing the possible disruption at ports in a no-deal scenario. Documents published last week about Operation Yellowhammer, the official plan to handle a no-deal scenario, suggested that there would be a low risk for ports outside Kent, a port that has a lot of EU traffic. But new documents show that this is only because tens of thousands of vehicles would be rejected because they would be non-compliant, meaning that the drivers would not have the correct permits or the correct papers filled in, and would be turned away. Also, the facilitation of trade between Northern Ireland and the Irish Republic still needs some time. Johnson is setting out plans for an all-Ireland economic relationship which must replace the Irish backstop. With this plan, Northern Ireland would effectively become a special economic zone inside both the UK and the EU. There would still be a border and everything that is not covered by the all-island regime would be subject to checks.

But, as Juncker stated, there is also a very big chance that the UK will leave the European Union without a deal. Two weeks ago, UK MPs passed a law which requires Boris Johnson to seek an extension of Article 50 if Johnson fails to secure a Brexit deal with the EU by 19 October (dubbed the Benn Act). There is no guarantee that Johnson will do that. However, another concern now is that even if Johnson agrees with the Withdrawal Agreement (WA) with the EU and the deal successfully passes through Parliament, there could not be sufficient time to pass through Parliament a separate act implementing the WA (a complex piece of legislation) – or it could be blocked by MPs – before 31 October. Now, once the WA is agreed, the Benn Act does not come into force because it does not take into account the separate act to implement the WA, so the result is a no-deal Brexit. Therefore, it is in the interest of Labour and Tory rebel MPs not to agree to the WA before the extension has been secured. An extension should be obligatory, whether there is a deal or not.

In the meantime, the Supreme Court, the UK’s highest court, is currently hearing the case over Johnson’s decision to temporarily shut down the UK Parliament. Scotland’s highest court ruled last week that the suspension was indeed unlawful, but the High Court in England had ruled earlier the opposite way. Therefore, the UK Supreme Court is now discussing if this case is justiciable and, if so, whether the prorogation was lawful. After two days of hearing arguments on both sides, also former Tory prime minister John Major spoke on the final day in court to doubt Johnson’s decision to suspend parliament. It is not yet known when the judges will deliver their verdict, but it is expected for next week.

In addition, on 18 September, a clear majority of the Members of the European Parliament voted for a resolution supporting the UK being given a Brexit deadline extension should it request one. The vote itself is largely symbolic because the European Parliament wants to show that it cannot be ignored. However, the EP will reject a deal that does not include a backstop. This is significant because the EP will need to vote through the final Brexit deal.

Brexit: The Blame Game

At the moment, British Prime Minister, Boris Johnson, is travelling through Europe. Johnson already met with the German Chancellor, Angela Merkel, in Berlin where he tried to renegotiate the Irish border backstop. However, Merkel stated that she was open for a dialogue and practical solutions for the Irish border, but she does not want to reopen the negotiations on the Withdrawal Agreement. Today, Johnson is traveling to Paris to meet French President Emmanuel Macron and on Saturday he will attend the G7 summit in Biarritz, France.

Next to his European tour, Boris Johnson also sent a request to the European Council President, Donald Tusk, asking whether the EU is prepared to consider a solution for the Irish border problem and, consequently, wants to reopen the negotiations with the EU. In his letter to Tusk, Johnson made it clear that it is crucial the Irish backstop be removed from the current Brexit deal. Johnson proposed to replace the backstop with alternative arrangements, such as technological solutions, and promised not to put infrastructure, checks or controls in place at the border, but did not provide concrete details. Tusk reacted by saying that he was not in favor of removing the Irish backstop as it is still the only assurance to avoid a hard border between Ireland and Northern Ireland. Tusk judged the alternatives of Johnson as unrealistic and misleading. Therefore, the blame game, of who ultimately will trigger a no-deal Brexit, seems to be accelerating.

As the negotiations between the UK and the European Union clearly do not seem to take off, London wants to show that they are serious about leaving. On 18 August, Brexit Secretary Stephen Barclay signed into law legislation to repeal the Act of Parliament which defined Britain’s EU membership in 1972. Barclay stated after signing: “This is a clear signal to the people of this country that there is no turning back, we are leaving the EU as promised on October 31, whatever the circumstances.” The repeal of the European Communities Act 1972 will take effect when Britain formally leaves the EU on 31 October. In addition, on 20 August the UK Government announced that, as of 1 September, UK officials will only attend EU meetings if they could affect national interests, e.g. security.

However, the consequences of leaving the EU without a deal are even worse than expected. A leaked government report, called Operation Yellowhammer, outlined the scenario of what would happen after 31 October if a no-deal Brexit were to happen. The report makes clear that businesses in the UK are not at all ready for such a scenario. A no-deal Brexit would especially have severe consequences for the transport sector. 50% – 85% of lorries travelling across the Channel may not be ready for French customs and at least three months of disruption to the short Channel crossings are expected. In addition, parts of the food supply chain, including the availability of fresh foods as well as ingredients and packaging, could also be impacted, leading to reduced choice and price rises.

In the meantime, Labour leader, Jeremy Corbyn, is trying to find allies in the House of Commons  to form a temporary government to secure an extension of the current Brexit deadline. However, Liberal Democrats leader, Jo Swinson, criticized the plan, saying that Corbyn is not the right person to build a temporary majority. In addition, Corbyn also said that he wanted to organize elections in which Labour would campaign for a second referendum with the option to stay in the European Union. Elections are likely as the majority of the current government shrank to only one seat. The political parties are also increasingly running political ads on Facebook, especially the Brexit Party, although the Conservative Party and Boris Johnson Facebook campaigns combined dominate the social media campaign.

Brexit: Leave takes control

It was no real surprise, but with 66% of the votes Boris Johnson became the new leader of the Conservative Party this week. The other contender, Jeremy Hunt, received 34% of the votes with an overall turnout of 87.4% among Conservative Party members. In his speech, Johnson vowed to unite the country and stressed again to deliver Brexit by 31 October. As a reaction to the election result, Chancellor Philip Hammond, Justice Secretary David Gauke, International Development Secretary Rory Stewart and Education Minister Anne Milton resigned from the Cabinet.

This was only the beginning of a radical overhaul. A day later Johnson drastically removed the leading figures from the Theresa May’s Cabinet. In total, 17 Cabinet and other top ministers were either sacked or resigned themselves. Jeremy Hunt was offered the Ministry of Defense, but he refused. Overall, Johnson put well-known Brexiteers in senior ministerial positions, thus introducing a hard-Brexit Cabinet. Dominic Raab becomes the new Foreign Secretary, Priti Patel Home Secretary, Sajid Javid Chancellor of the Exchequer and Michael Gove Chancellor of the Duchy of Lancaster. Steve Barclay keeps his job as Brexit Secretary.

Equally interesting is the appointment of Dominic Cummings as Senior Advisor to the new PM. Cummings was a key brain behind the Vote Leave campaign and was the person who came up with the successful slogan “Take Back Control”. This new addition to Johnson’s inner circle highlights further the Leave-nature of the new Government.

Nonetheless, the UK’s parliament remains as divided as ever, now with more sacked Remainers from May’s Government who might not hesitate to rebel in Westminster against a hard Brexit. The arch-Brexiteer Jacob Rees-Mogg will play a key role here. He has been promoted to Leader of the House of Commons, which could yet be “more proof that Johnson is deadly serious about pushing a No-Deal Brexit through parliament if necessary” according to Politico. Rees-Mogg masters parliamentary procedure like no other.

Consequently, the likelihood of a hard Brexit is more than ever a possibility. If there is no agreement on 31 October Johnson wants the UK to leave the EU unconditionally. One of the biggest challenges in finding a deal in only three months is still the Northern Ireland backstop. Boris Johnson’s main goal is to replace the Northern Ireland backstop in May’s Withdrawal Agreement (WA) with “alternative arrangements” to take effect at the end of the transition period. Not only has the EU repeatedly said the WA cannot be renegotiated, but it is also believed to be unrealistic to expect technology can be put in place on time by the end of the transition period. If this plan fails, Johnson has said he would seek to trade under Article 24 of the World Trade Organization’s General Agreement on Tariffs and Trade (GATT) to avoid tariffs with the EU during the transition period in which the UK and the EU negotiate a free trade agreement. 31 October remains the deadline.

What’s next?

The UK Parliament goes into recess until 3 September. To prevent that the Parliament would be blindsided in the ongoing debates, an amendment on the Northern Ireland (Executive Formation) Bill tabled last week, aims to make it more difficult to prorogue Parliament and force through a No-Deal Brexit. In addition, from 29 September until 2 October the Conservative Party will hold its yearly party conference. With Brexit barely a month away, the party leadership could make important announcements.

Brexit: state of play of the no deal scenario

That a no deal Brexit will damage the British and European economy was already clear. The Catholic University of Leuven even calculated that a no deal Brexit would cost the European Union 1.54% of GDP and 1.2 million jobs. The effect for the UK: a 4.4% reduction in GDP and 525,000 job losses, this only in the short term. In terms of sectors, a hard Brexit would have especially a severe effect on the European Food and Beverages sector. A hard Brexit would also have a big impact on the European textile industry and in addition, services sectors would be heavily affected.

Due to the severe economic consequences of a no deal, Members of Parliament (MPs) from both the Conservative Party as the Labour Party tabled an amendment on the parliamentary estimates bill that would deny funding to four government departments in the event of a no-deal Brexit without explicit parliamentary approval. The amendment concerned the departments for International Development, Work and Pensions, Education, and Housing, Communities and Local Government. However, the Speaker of the House of Commons, John Bercow, said on 1 July that he had not selected this amendment. Grieve and Beckett have, therefore, re-submitted their amendment on 2 July, but 10 Downing Street has strongly condemned this amendment to shut down the government as very irresponsible.

Not only the MPs are concerned, but also Brexit Secretary, Stephen Barclay, asked last week to accelerate the preparations for a no deal Brexit. Barclay said: “Time is of the essence and we can’t be complacent. I do not want to be in a situation when we get to November and there were things we could have been doing at this time and we didn’t do them.”

Key players in a possible no deal Brexit are of course Boris Johnson and Jeremy Hunt, the remaining contenders in the Conservative Party leadership race. In his bet to become the next leader of the Conservative Party, Foreign Secretary Jeremy Hunt presented his ten-point plan for delivering Brexit in case he wins. Hunt proposes to speed up the no deal preparations, the establishment of a No Deal Cabinet Task Force and the appointment of a new negotiating team. A Government under his leadership would prepare for a No Deal Brexit Budget, and the Treasury would prepare a No Deal Relief Programme including a £6 billion fund for the fishing and farming sectors.

Boris Johnson, on the other hand, has said that he believes there is only a “very, very small possibility” that the UK will have to leave the EU without a deal. However, he also said that when he is elected as new Prime Minister, every member of his Cabinet should have to live with the possibility of leaving the EU without a deal. This is also in line with the fact that Johnson is preparing an emergency budget for such a scenario. More concretely, this budget will consist of a tax cut and a revision of stamp duties to safeguard the economy after a hard Brexit.

What’s next?

Conservative Party members will receive their postal ballots between 6-8 July. The final deadline to return the ballots is Sunday 21 July. Boris Johnson and Jeremy Hunt participate in hustings until 17 July. It is widely believed, however, that a majority of voters will immediately cast their vote when they receive their ballot. The next few days will, therefore, be key for Hunt to get his message across and for Johnson to avoid any gaffes. In the week of 22 July, Britain’s new Conservative Party leader and Prime Minister will be announced.

Brexit: the final campaign?

Boris Johnson and Jeremy Hunt, the two remaining candidates in the race for the leadership of the Conservative Party and the position of Prime Minister of the UK, are campaigning throughout the country to win the votes of 160,000 Conservative Party members. Johnson is more likely to win, not only because he had a big lead over Hunt in the last voting round (170 to 77 votes), but also because a recent poll shows that more than three quarters of the party members believe Johnson would be a good leader.

The strength of Johnson is that he is clear in his mission. He wants to leave the EU on 31 October, with or without a deal. In a no-deal scenario he even proposed this week not to impose tariffs on goods entering the UK. Yet, Johnson stressed that it is not only a decision made by the UK, but also by the EU. Despite criticism of others like the Governor of the Bank of England and the International Trade Secretary that this would not be possible Johnson did not change his strategy. Therefore, his rival, Jeremy Hunt, is blaming Johnson that his no-deal Brexit plans are remaining too vague and unrealistic. Hunt distinguishes himself from Johnson by pursuing a better deal rather than a no-deal Brexit. Hunt stated that a new deal with the EU would be difficult but said that he would keep negotiating if parliament were to veto the no-deal option, even with the option of an extension after 31 October.

One of the main issues, also in this campaign, is still the Irish backstop. To solve this problem three domestic advisory groups have been established. The Technical Alternative Arrangements Advisory Group is the first, the second is comprised of businesses and trade unions and gathered for the first time this week, and the third will be made up of parliamentarians. Boris Johnson’s main goal is to replace the Northern Ireland backstop in May’s Withdrawal Agreement (WA) with “alternative arrangements” to take effect at the end of the transition period. Jeremy Hunt’s main goal, too, is to renegotiate the WA and get rid of the Northern Ireland backstop as it is currently stated. However, as stated before, Hunt would continue negotiations to find a deal beyond 31 October.

The Irish Prime Minister Leo Varadkar reacted this week again that he could not accept alternative arrangements as an alternative for the backstop before he knew how it would work in practice. In addition, he said that it would never be possible to have these alternatives ready before the UK leaves the EU. Therefore, he still supports the backstop as the only solution for the time being.

What’s next?

Conservative Party members will receive their postal ballots between 6-8 July. The final deadline to return the ballots is Sunday 21 July and consequently, the winner will be announced in the week of 22 July. Johnson and Hunt participate in hustings until 17 July.