For a long time, Mrs May has contended that “no deal is better than a bad deal”. Whilst this make for a macho soundbite for the easily impressed, it has never stood up to any real scrutiny. By definition, leaving the EU will cause disruption to the UK-EU trading and political relationship, so to that extent, any deal is a bad deal: worse than the current situation. However, there is a spectrum of engagement with the EU running from full membership to no relationship – the latter being the outcome of a “no deal” scenario.
The EU and UK government do want to have a close relationship post Brexit, but the closest relationship involves staying in the EU, or joining EFTA which is unacceptable to the UK side (currently). Disengagement of the two means that a number of complicated and, frankly, intractable issues are addressed, stemming from the altered legal situation.
The latest body to warn on the risks of the “no deal” outcome is the IMF. Speaking in London, IMF managing director, Christine Lagarde stated: "Any deal will not be as good as the smooth process under which goods, services, people and capital move around between the EU and the UK without impediments and obstacles." The IMF is forecasting UK growth of 1.5% this year and next, but only if a broad agreement is arranged between the EU and the UK post Brexit. "Those projections assume a timely deal with the EU on a broad free trade agreement and a relatively orderly Brexit process after that,” Lagarde noted.
A no deal scenario would produce “a significantly worse outcome” which would involve substantial costs for the UK economy. It would likely reduce growth, shrinking the economy, trigger a depreciation in Sterling and increase the national debt.
Ms Lagarde stated: "The larger the impediments to trade in the new relationship, the costlier it will be. This should be fairly obvious, but it seems that sometimes it is not.”
Significantly, Philp Hammond, the Chancellor, endorsed Ms Lagarde’s remarks, noting: "The IMF are clear today that no deal would be extremely costly for the UK as it would also for the EU, and that despite the contingency actions we're taking, leaving without a deal would put at risk the substantial progress the British people have made over the past 10 years in repairing our economy."
It would seem, therefore, that in Cabinet the “no deal is better than a bad deal” is a mantra that nobody actually believes.