Last time we spoke, we answered some of the most important questions about Brexit: How did it come to be in the first place? Can we stay in the single market if we leave the European Union, what on earth parliament keeps voting on, and most importantly, whether Milky Way Magic Stars will still be available after D-Day on the 29th March. But what’s been going on since then? Well, quite a bit actually.
Since the catastrophic defeat of Theresa May’s Brexit deal which was rejected by a whopping 230 votes, she headed back to Brussels to try and negotiate changes to the Irish backstops and get a revised deal for the Commons to vote on. However, unfortunately, Brussels wouldn’t budge, and at the time of writing this, the prime minister had promised MPs an update by 26th February. So what’s next?
Well, last week MPs voted to block a no-deal Brexit after passing an amendment which rejects the UK leaving the EU without a withdrawal agreement, but at this stage, pretty much anything is possible.
Whatever happens, deal or no deal, hard Brexit or calling the whole things off, one thing’s for sure: Brexit is going to have a pretty big impact on our everyday lives. Without further ado, here’s our review of what Brexit really means for the UK.
In either Brexit scenario, food prices are likely to go up. There’s a whole host of complicated reasons why, but basically they all come down to the fact that the UK will need to pay additional charges to import food (remember all that chat about import, export and the single market in the first blog? If not, refresh your memory here). And under a no-deal scenario, the UK would be treated as a “third country” by the EU – which means commerce would be governed by the World Trade Organisation rules.
Around 52% of the food we consume has its origins in the UK – which means 48% of the food we eat is imported. In the first half of 2018, we imported £23 billion worth of food. Of that, around 30% of our imports are from the EU, with key examples including Irish beef (£425 million), French wine (£321 million – we can probably take responsibility for about 50% of that), and Danish pork (£171 million). We even spend £12 million on Greek olives! Further afield, our bananas come from Costs Rica (£50 million) and our grapes are from South Africa (£115 million). So if there’s a hard Brexit, tariffs on imported food go up by around 22% – which would add a whopping £220 million onto our food costs
And where would that be reflected? Food prices, of course. Meat, vegetables and dairy products are set to have the largest price rises under a no-deal scenario – and the Bank of England has warned that if the UK crashes out of the EU without a deal, shopping bills could surge by 10%. Sure, that’s the most extreme no deal scenario, but even if the government was able to negotiate a no tariff deal which would limit extra tariff costs, additional border inspections and safety checks would still see food prices rise by at least 3.8%. The average food shop in the UK is around £89 a week – and under a hard Brexit, this would increase to around £108 – which means you would add nearly £1000 to the food bill every year. Gulp.
Next up (and a logical step from the issue of food), farming. Surprisingly, despite the majority of farmers voting for Brexit, farmers and food producers are among the most vulnerable businesses in a no-deal scenario. First, the supply of seasonal harvest workers, mainly from eastern Europe, will dry up unless new immigration rules are quickly brought in. And secondly, there’s the devastating impact on meat and food export. Not only will World Trade Organisation tariffs make our products less competitive on the continent, but EU rules mean a possible wait of up to six months before UK farmers are even certified as approved exporters.
There’s a pretty massive divide in opinion though (not at all surprisingly). Some are choosing to look on the bright side and argue that leaving the EU could actually give Britain a golden opportunity to secure ambitious free trade deals, all the while supporting our farmers and producers to grow and sell more great British food. However, others have a much gloomier outlook, with some going as far as to say that farming businesses could be completely wiped out after the Brexit transition. Gulp.
One of the pulls of the left campaign was that the UK would be completely free to set its own controls on immigration. However, it works both ways: if passport and customs checks are heightened, there could be long delays at borders, and flights to the EU could be grounded as the necessary confirmations to cover both ends of the journey might not be in place. Meanwhile, the fate of expats (1.3 million Britons in EU countries and 3.7 million Europeans in Britain), their rights to live and their rights to work would be unclear. Professionals working in the EU might find the qualifications are no longer recognised, which means they would be no longer able to practice.
So far, so scary. Surely things are looking better from the housing perspective though, right? Erm… no really. Mark Carney, Governor of the Bank of England (so it’s safe to say he probably knows his stuff) has warned that in light of a no deal Brexit, the economy would suffer and house prices could fall by as much as 30%. For first time buyers, that’s pretty good news (aside from the fact that banks will be willing to lend less). But for everyone else? Not so much.
Sellers putting their houses on the market are sitting there for longer, because buyers are waiting to see what happens. This has caused a decrease in transactions and is causing house prices to fall. Why does this matter? Well, the housing market is intrinsically linked to consumer spending. When house prices go up, people spend more. When prices go down, people panic that their mortgage is now more than the house is worth, and tighten their purse strings.
Let’s look at it this way: if the bank lent you £200,000 for your house, they want all their money back and don’t care that it’s now only worth £190,000. So what happens? You start being much more careful with your money. That Friday night takeaway becomes leftover pasta, which means that the Chinese down the road makes less money, and therefore pays less tax, and less tax means the government has less money. The government will then try to get more money by raising prices of goods – which is also known as inflation – and it’s all linked in one big downward spending spiral. S
But really, only a no deal Brexit scenario will impact the housing market in a big way. Sure, Brexit is currently causing uncertainty, but the property market has always been this way – and data shows that the changes to buy-to-let stamp duty in April 2016 had a bigger impact on the market than the Brexit vote. So, as long as there’s no no-deal, there’s probably no need to panic yet (phew!).
To sum up so far: So, to sum up so far: If the UK fails to agree on exit terms, we face the possibility of a hard Brexit, going outside of EU trading regulations and trading using international tariffs – which are expensive. In turn, goods imported to the UK are costing more, which goes for oil too. As a result, the value of the pound would go down, and fuel prices would increase by as much as 20% – and the shock to the economy could mean businesses withdraw from the UK and invest in safer places. However, a soft Brexit means fuel prices would remain the same, or possibly even drop slightly as confidence in the EU single market holds. Sure, there will be a level of uncertainty immediately post Brexit, which will manifest itself in petrol price fluctuations. However, having the freedom to make other deals with oil-rich countries could benefit the pound in the long term.
When asked about the likelihood of a no-deal Brexit, as politics professor Tim Bale puts it, “almost every conceivable outcomes seems just as likely as unlikely”. As the Brexit drama continues to stagger towards its end date, things are changing by the day, One thing for sure: it’s written in law that the UK will be leaving on 29th March at