Britain risks a ‘chaotic and damaging’ Brexit if there is no deal with the EU, MPs warn today.
Members of the Commons Brexit Select Committee say Theresa May must amend her Chequers plan if the EU will not accept them and cautions that a ‘no-deal’ outcome would ‘leave many businesses facing huge uncertainty’.
They urge the PM to consider staying in a customs union and the European Economic Area (EEA) as a potential fallback position.
But the report’s conclusions were rejected by several of the committee’s Eurosceptic members, including Tory MP Jacob Rees-Mogg.
Mr Rees-Mogg, chairman of the pro-Brexit European Research Group, said reverting to World Trade Organisation rules if there is no trade deal would not be as bad as the report suggests – and would present some considerable advantages.
Theresa May must amend her Chequers plan if the EU will not accept it to avoid a chaotic no deal, MPs have warned, but Jacob Rees-Mogg has rejected the claims
(PA Graphics)
Separately, the International Monetary Fund (IMF) also warned yesterday of the disastrous consequences for the British economy of a ‘no deal’ Brexit, including a potential recession.
The pound could plummet and the economy could go into reverse, IMF chief Christine Lagarde claimed.
She added that there could be severe disruption to trade, with air travel and movement of goods at risk.
Mrs Lagarde said: ‘Our assumption is it would have very dear economic consequences. It would be a shock to supply and it would inevitably have a series of consequences in terms of reduced growth going forward, increased deficit, most likely a depreciation of the currency.
Christine Lagarde, International Monetary Fund (IMF) Managing Director, has warned that a no deal Brexit will shrink the UK economy
‘It would, in reasonably short order, mean a reduction in the size of the UK economy.’
Labour MP Hilary Benn, chairman of the Brexit Select Committee, said with time running out for the UK to secure a withdrawal agreement with the EU, there were ‘significant problems yet to be resolved’.
He said the Irish border backstop was the main sticking point, and called on Ministers to ensure ‘the continuation of tariff and friction free trade which is so important to the future of our economy’.
He added: ‘If the Chequers Plan is not acceptable as a basis for that, then the Government will need to find a different approach urgently.’
The report warned that there might not be enough time to agree back up deals ‘to mitigate the worst effects’ before the UK leaves the EU at the end of March next year.
But Mr Rees-Mogg said it was wrong to say the only solution to the Northern Ireland problem was to stay in the customs union and single market.
‘I think Mrs May does need to change course but in the direction of a Canada style free trade deal,’ he said.
He said the same technological solutions reportedly being offered by the EU to manage customs and other checks between Northern Ireland and Great Britain could be used on the Northern Ireland border.
Number 10 has repeatedly ruled out staying in the EEA, which would keep Britain in the single market, warning it would mean continued free movement of migrants and was not true to the spirit of the referendum result.
The IMF predicted that Britain’s economy will grow by 1.5 per cent this year and next if Britain leaves the European Union with a deal, a slight improvement from its last forecast in July, when it predicted economic growth of 1.4 per cent in 2018.
Mrs Lagarde, 62, a former French minister, also claimed that Britain will be worse off outside the EU regardless of what deal is struck.
She said: ‘Let me be clear, compared with today’s smooth single market, all the likely Brexit scenarios will have costs for the economy and to a lesser extent as well for the EU.’