Rishi Sunak, the chancellor, has played down the impact of a “no trade deal” Brexit, ahead of the resumption of virtual talks between the EU and UK this week to try and strike a final agreement.
Mr Sunak declined to say what modelling the Treasury had conducted on the economic impact of leaving the EU without a trade deal when Britain’s transition period ends on January 1, suggesting the effects would mainly be in the short term.
While the chancellor said it was hard to be “precise” about the negative short-term impact — including on sensitive sectors like the automotive industry — he said it would be dwarfed by the economic impact of Covid-19.
Some government officials believe Mr Sunak fully expects a deal to be agreed and that his comments were intended to remind EU negotiators that Britain was prepared to walk away from the talks. The chancellor said the UK would “not accept a deal at any price”.
But David Gauke, a former Treasury minister, said “history will not judge kindly” cabinet members who failed to warn of the serious economic damage a hard Brexit with no trade deal would cause.
“The ambitious among them know that to be seen to be associated with compromise on Brexit is a career damaging move,” Mr Gauke wrote on the ConservativeHome website. “They keep their heads down, content to let others challenge the prejudices of their party’s more extreme supporters.”
Mr Sunak told the BBC’s Andrew Marr programme on Sunday that “in the short term specifically and most immediately it would be preferable to have a deal because it would ease things in the short term”.
But he added: “I think the most important impact on our economy next year is not going to be from that. It’s because of coronavirus. I’m very confident about the British economy in all circumstances, and I think longer term.”
However, Anton Spisak, a former UK civil servant working on Brexit, tweeted: “True, the costs will be *most visible* in January. But the *biggest* costs will be in the medium/long term: supply chains shifted; client operations moved elsewhere; investments cancelled.”
Michel Barnier, the EU’s chief Brexit negotiator, remains in self-isolation along with senior members of his team, after one of the top EU officials involved in the talks tested positive for Covid-19 last week.
EU officials said discussions would continue in virtual format this week, with British officials hoping face-to-face talks could resume at the end of the week. Both sides remain hopeful a deal can be struck but negotiations look likely to drag into next week and possibly into December.
One EU diplomat noted that Brussels was already running into procedural complications because of the talks dragging on: there was already too little time for EU institutions to be able to translate a deal into all of the bloc’s 24 official languages ahead of a European Parliament ratification vote in the week of December 14 — the assembly’s last scheduled session of the year.
The diplomat said that workarounds were being explored, and MEPs have already indicated that they are prepared to hold a vote closer to the end of the year to buy more time for talks.