Higher costs for European holidays, more red tape for exporters and British expats in the EU being cut off from their pensions are among the possible consequences of a no deal Brexit, the government acknowledged yesterday.
But Dominic Raab, the Brexit Secretary, has insisted the UK would still be better off.
Mr Raab said there would be opportunities for the UK even if talks with Brussels fail, but last night businesses failed to share his optimism, warning of serious damage to the economy from a ‘cliff edge’ Brexit.
Concerns were raised about cross-border payments, which would no longer be covered by a “surcharging ban” that prevents businesses adding an extra levy when people use a specific payment method.
The ban prevents businesses from charging customers for paying by the likes of PayPal or debit or credit cards, which Treasury earlier this year characterised as “rip-off fees”.
Last night the Scottish Government and opposition parties responded to the publication of the first batch of papers setting out planning and advice for a no-deal Brexit by warning the government was walking into a “disaster”.
And there was fresh division within the government over the possibility of a no-deal scenario, with Philip Hammond warning that failure to secure a Brexit deal would have “large fiscal consequences”.
In a letter to the chair of the Commons Treasury Select Committee, the Chancellor highlighted government analysis that suggests the UK’s GDP would be 7.7 per cent lower and borrowing £80 billion higher after 15 years without a Brexit deal, undermining Mr Raab’s attempts to reassure business and the public.
In a speech, Mr Raab dismissed warnings about the impact of a no deal, including reports the UK could run short of the nation’s favourite sandwich fillings and claims the army could be called in to help distribute food, as “misinformation”.
“You will still be able to enjoy a BLT after Brexit, and there are no plans to deploy the army to ensure food supplies,” the Brexit Secretary said.
However, Mr Raab revealed that health providers were being asked to build up a stockpile of six weeks’ worth of medical supplies and equipment that could be hit by disruption to trade in a no-deal scenario.
The first 25 technical papers setting out the government’s advice and planning for no deal cover a wide range of topics, from nuclear regulation to blood safety.
They revealed that consumers could face hundreds of millions of pounds worth of credit card charges when buying from EU companies, on top of higher costs for euro-transactions.
It means almost every part of a foreign holiday, including booking a flight with a European airline or accommodation through Airbnb from the UK through the internet, could become more expensive. Those “rip-off” surcharges for using credit cards, which cost UK consumers £166 million in 2015, were only abolished by the EU earlier this year. Without a Brexit deal, UK financial services firms may not be able to serve their clients in Europe if they haven’t shifted some of their operations into the EU by March 2019.
That includes British pensioners and expats who have purchased insurance and annuities from UK firms, particularly those who paid into their pensions while working in Europe.
A paper on financial services states: “In the absence of EU action, EEA clients will no longer be able to use the services of UK-based investment banks, and UK-based investment banks may be unable to service cross border contracts.
“The UK authorities are not able through unilateral action to fully address risks to the EEA customers of UK firms currently providing services into the EEA.”
It adds: “The cost of card payments between the UK and EU will likely increase, and these cross-border payments will no longer be covered by the surcharging ban which prevents businesses from being able to charge consumers for using a specific payment method.”
The no-deal plans also reveal that exporters of organic produce face a wait of at least nine months to have their goods recognised as meeting EU organic standards, which the National Farmers’ Union described as “effectively a trade embargo on exports to the EU”.
“Not only would this be hugely disruptive but it threatens livelihoods and businesses in the UK,” NFU President Minette Batters said.
There were warnings from other exporters, too, despite an insistence from Mr Raab that the government would take “unilateral action to maintain as much continuity as possible” – a comment interpreted as suggesting customs checks could be relaxed to prevent gridlock at British ports in the event of no deal.
Companies involved in trade with the EU have been advised by the government to seek out “the services of a customs broker, freight forwarder or logistics provider to help, or alternatively secure the appropriate software and authorisations” to avoid having their products held up at the border.
Sarah Laouadi, European policy manager at the Freight Transport Association, warned that “no deal would be disastrous for logistics”.
Josh Hardie, the deputy director general of the Confederation of British Industry, said the papers proved that “those who claim crashing out of the EU on World Trade Organisation rules is acceptable live in a world of fantasy”.
Liberal Democrat Brexit spokesman, Tom Brake MP said: “From customs declarations, VAT payments and trade licences to the renegotiation of contracts and the hiring of customs brokers, a no-deal Brexit would make life miserable for companies that export to, or import from, the EU.
“In many cases, especially for the small firms that can’t afford fancy technology and consultants, it is likely to put them off trading altogether.
“Far from liberating Britain from the bureaucrats in Brussels, Brexit could sink our economy in a swamp of regulation.”
Read more: What would a ‘no deal’ Brexit look like?