A hard Brexit would be tougher for Britain

A prognosis is just a fuzzy statement about an unknown future. When it comes to Britain's separation from the European Union, only one thing is certain: If no acceptable Brexit agreement is negotiated by the end of the year, the World Trade Organization's terms would enter into force on January 1. That would mean border controls and all kinds of new customs duties. 

Because of the uncertain situation, there is plenty of speculation about traffic jams. One day at the end of November gave an insight into what could happen if a deal has not been struck. A trial of post-Brexit border checks by the French authorities in Calais, on the French side of the Channel, led to trucks being backed up for about five kilometers in and around Dover, on the British side of the Channel. Britain's government predicts long-term traffic jams of up to7,000 trucks in Dover from January 1 onward. 

The new tariffs that would be imposed on goods if WTO terms were to come into effect would create a similar nightmare. According to an assessment by Oxford Economics into the economic implications of Brexit, EU exports to the UK will be subject to an average 3.1% tariffs and 1.4% "nontariff barriers." There will also be 3.3% tariffs on goods going into the EU. However, the major difference will be that cars and agricultural goods will be subject to 10% more and dairy products to a whopping 36% more.

What's Johnson's plan?

The financial sector was kept out of free trade negotiations between Britain and the European Union. The consensus in the EU seemed to be that the situation would look bleak for the financial sector on the European side of the Channel if the City of London was no longer in the picture.

But, even without taking the financial sector into account, there is plenty of money at stake with regard to trade: In 2019, the trade volume between the UK and EU amounted to €500 billion. German exports alone came to almost €79 billion. Britain now ranks fifth among Germany's trade partners, down from third four years ago — another consequence of Brexit before it has been finalized.

Many observers have expressed surprise at the the government's recent stance, which at times gives the impression that Prime Minister Boris Johnson and his allies think that the talks are a mere poker game. Britain's industry is much more dependent on international supply chains with the EU than vice versa. According to a study by the Munich-based Ifo Institute for Economic Research, the UK imports a good deal of intermediate products from the EU, which do not have necessarily have viable alternatives. Many goods are likely to become much more expensive in the UK. 

Pandemic problem, too

The German credit agency Euler Hermes has forecast that the cost of imports could rise by 15%. Inflation could increase by 5% and sterling could depreciate by 10%. The daily Bild newspaper pointed out that even umbrellas could become more expensive. Yet another example of speculation in view of a lack of hard numbers from the future. 

Many observers agree that a hard Brexit would be worse for Britain than for the European Union — at least those who are not allied with Johnson. Marc Tenbieg from the German Mittelstand Federation (DMB) told the German daily Die Welt that German companies had prepared themselves for a hard Brexit and were "relatively relaxed.”

Tenbieg's counterparts in Britain are unlikely to be as relaxed. Britain is already reeling from the coronavirus pandemic and the UK Office for Budget Responsibility (OBR) has forecast that the economy could plummet by 11.3 percent this year and by 2% more than that next year if there is a no-deal Brexit after all. 

The Organisation for Economic Co-operation and Development has offered an even more pessimistic outlook. It predicts that the British economy will grow by 3.5% less than if Britain had stayed in the European Union, even if there is a deal. And if there isn't, then the economy could shrink by 5% within two years. 

This does not bode well for Britain — or the European Union. 

This article has been adapted from German.