UK Politics

What is a 'no-deal Brexit'?

Exit sign Image copyright Getty Images

The possibility of a no-deal Brexit is very much alive, after a UK government source said securing a deal with the EU is "essentially impossible".

Boris Johnson is committed to leaving the EU on 31 October, despite MPs passing a law that could extend the deadline into the new year.

But what does the term "no deal" really mean?

What is a no-deal Brexit?

In a no-deal scenario, the UK would immediately leave the European Union (EU) with no agreement about the "divorce" process.

Overnight, the UK would leave the single market and customs union - arrangements designed to help trade between EU members by eliminating checks and tariffs (taxes on imports).

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Image caption The Brexit Party gained the most MEPs in May's European elections, on a no-deal platform

No deal also means immediately leaving EU institutions such as the European Court of Justice and Europol, its law enforcement body.

Membership of dozens of EU bodies that govern rules on everything from medicines to trade marks would end.

And the UK would no longer contribute to the EU budget - currently about £9bn a year.

Under former Prime Minister Theresa May's deal - which was voted down three times by Parliament - the UK would have entered a 21-month transition period.

This would have provided some breathing space, maintaining much of the status quo, while the two sides tried to negotiate a trade deal.

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Media captionConfused by Brexit jargon? Reality Check unpacks the basics

How could no deal happen?

After Mrs May's deal was defeated, the Brexit deadline was extended to 31 October.

Mr Johnson has submitted a new Brexit plan, which the EU is currently considering.

However, following a call between Boris Johnson and German Chancellor Angela Merkel, a Number 10 source said a deal was "essentially impossible".

To avoid a no-deal Brexit at the end of October, the UK government must pass a Brexit divorce plan into law, obtain another extension from the EU, or cancel Brexit.

Many politicians are against no deal and Parliament has passed a law that could keep the UK in the EU until the new year, known as the Benn Act.

Opponents of no deal say it will damage the economy and lead to border posts between Northern Ireland and the Republic.

But some politicians support no deal and say any disruption could be quickly overcome.

What would it mean for trade?

Under a no-deal Brexit, there would be no time to bring in a UK-EU trade deal.

Trade would initially have to be on terms set by the World Trade Organization (WTO), an agency with 162 member countries.

If this happens, tariffs - taxes on imports - will apply to most goods that UK businesses send to the EU. Many companies worry that could make their goods less competitive.

Trading on WTO terms would also mean border checks for goods, which could cause traffic bottlenecks at ports, such as Dover.

No deal would also mean the UK service industry would lose its guaranteed access to the EU single market.

That would affect everyone from bankers and lawyers to musicians and chefs.

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Image caption Protests have been held against the possible return of a hard border in Ireland after a no-deal Brexit

What about the Irish border?

No-one really knows what will happen at the Irish border if there's a no-deal Brexit on 31 October.

In theory, border checks will be needed as soon as the UK leaves the single market and customs union.

However, neither the UK or Irish governments have said they are willing to install border posts.

What about the 'divorce bill'?

No-deal supporters say the UK could avoid paying the divorce settlement agreed by Theresa May's government.

That was widely believed to be about £39bn, although delays to the exit date mean some of it has already been paid and the latest estimates put it at about £33bn.

But opinion is split on what happens if the UK refuses to pay and there's a possibility the UK could end up in an international tribunal.

Even if there were no legal consequences, refusing to pay could mean political fallout - lessening the UK's chances of securing an EU trade deal in the future.

What does it mean for individuals?

Individuals could be affected in all sorts of ways.

For example, if the pound falls sharply in response to no deal and there are significant delays at ports, like Dover, it could affect the price and availability of some foods.

There are also concerns over potential shortages of medicines.

EU citizens in the UK can apply for settled status, allowing them to remain even if there is a no-deal.

UK expats in the EU are advised to register as residents of the country they live in, although no deal could make moving across borders more difficult.

Travelling with pets will become more complicated and expensive.

And European Health Insurance Cards (EHIC) would be invalid after a no-deal Brexit.

Are preparations under way?

Most economists and business groups believe no deal would lead to economic harm.

For example, the Office for Budget Responsibility - which provides independent analysis of the UK's public finances - believes a no-deal Brexit would cause a UK recession.

To cushion some of the impact, the government is looking at what might happen in a worst-case no-deal scenario. This includes:

  • border delays
  • increased immigration checks
  • less food available
  • possible price increases for utilities, food and fuel
Image copyright Gareth Fuller/PA
Image caption A section of the M20 had been reserved exclusively for lorries, as part of no-deal Brexit plans

A week after taking office, Mr Johnson pledged an extra £2.1bn specifically to prepare for leaving the EU without a deal.

Prior to this, the government led by Mrs May had promised £4.2bn to prepare for a range of Brexit scenarios.

Businesses have been encouraged to prepare by stockpiling in case supplies are disrupted.

Supporters of no deal say some of the risks have been exaggerated and that previous warnings have proven unfounded.

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