Many European companies are planning for an economic shock in case the “nightmare” scenario becomes reality on March 29 next year.
European Commission President Jean-Claude Juncker on Wednesday said it would be an “absolute catastrophe” if the UK leaves the European Union without a transition deal in place.
For this reason, the commission and EU member states are working hard to avoid such a scenario, Juncker added, “but it takes two to manage a decent tango”.
Prime Minister Theresa May’s failure to find a deal the British parliament will approve means the world’s fifth-largest economy now faces three choices: agreeing on a last-minute deal, halting Brexit, or leaving the EU without an agreement.
No deal means there would be no transition, so the exit would be abrupt. Bank of England Governor Mark Carney said leaving the EU with no transition could be akin to the 1970s oil shock.
May has yet to win the support of a deeply divided parliament for the agreement she struck last month with EU leaders to maintain close ties to the bloc.
However, British politicians have been unable to agree on any alternative Brexit course, deepening concerns the UK will, as May has warned, drop out of the world’s biggest trading bloc without a deal.
“Businesses of all sizes are reaching the point of no return, with many now putting in place contingency plans that are a significant drain of time and money,” the heads of Britain’s five biggest business lobby groups said. “The risk of a ‘no-deal’ Brexit is rising.”
The EU said it would avoid the interruption of air traffic, keep financial and other trade open, and respect British citizens’ residency rights in the bloc if Britain left without a deal in March.
“The Commission has called upon Member States to take a generous approach to UK nationals who are already resident in their territory,” the European Commission said in a statement on Wednesday.
“The Commission expects the reassurances given by the UK authorities – that, even in case of no deal, the rights of EU citizens in the United Kingdom will be protected in a similar way – to be formalised soon so that it can be relied upon by citizens.”
Warning from corporate giants
The world’s biggest companies, from Apple and Toyota to JP Morgan and Goldman Sachs, have cautioned that Brexit could complicate their businesses.
Business leaders fear that additional checks on the post-Brexit UK-EU border will clog ports, silt up the arteries of trade and dislocate supply chains across Europe and beyond.
“Firms are pausing or diverting investment that should be boosting productivity, innovation, jobs and pay, into stockpiling goods or materials, diverting cross-border trade and moving offices, factories and therefore jobs and tax revenues out of the UK,” the business groups said.
The British government said on Tuesday it would implement plans for a no-deal Brexit in full and begin telling businesses and citizens to prepare.
May has delayed a vote on her deal until mid-January, prompting some MPs to accuse her of trying to force parliament into backing her by running down the clock as the March 29 exit date approaches.
On Wednesday, May urged the leaders of Scotland, Wales and Northern Ireland to “listen to business” and back her deal.
Without one, the UK would trade with the EU under World Trade Organization terms.
Brexit supporters say while there may be some short-term disruption, in the long-term, the UK will thrive outside what they cast as a doomed experiment in German-dominated unity and excessive debt-funded welfare spending.