A leaked report says leaving the EU without a deal would cause Britain a 'major economic shock'

Thomas Colson
Theresa May

REUTERS/Toby Melville


  • Leaked Treasury report warns leaving EU without deal and falling back on WTO rules would result in "major economic shock"
  • MPs say there is "no evidence" that "serious planning" for the outcome is underway
  • Brexit secretary David Davis insists government has been planning for all outcomes

LONDON — Prime Minister Theresa May's plan to leave the EU without a trade deal if she fails to secure a favourable one would cause Britain a "major economic shock," according to a government document leaked to the Independent on Sunday.

May has previously stated that "no deal would be better than a bad deal," but the unpublished Treasury report says that falling back on World Trade Organisation (WTO) tariffs is worse than any other option, describing it as the "alternative to membership with the most negative long-term impact" on the economy.

The 36-page report says that WTO tariffs — the default trading option for a country without formal trade deals — would drive up food prices and damage jobs and companies.

It says that WTO rules would mean "new taxes on British trade" in the 53 countries with which the EU has free-trade agreements, warning that it "would take years" to replicate those deals.

"No evidence" of "serious contingency planning" 

On Friday, a powerful committee of MPs accused the government of putting the national interest at risk by failing to prepare for the "real prospect" that Brexit negotiations could end with no deal.

The criticism was made by the all-party Foreign Affairs Select Committee, chaired by Conservative MP Crispin Blunt, who supported leaving the EU.

He said: "The possibility of ‘no deal' is real enough to require the government to plan how to deal with it.

"But there is no evidence to indicate that this is receiving the consideration it deserves or that serious contingency planning is under way. The government has repeatedly said that it will walk away from a 'bad' final deal. That makes preparing for 'no deal' all the more essential.

Speaking on the BBC's Andrew Marr show on Sunday morning, Brexit secretary David Davis insisted: "We have been planning for all the possible outcomes."

Watch part of his interview below:

After Foreign Secretary Boris Johnson said on Sunday morning that Britain would be "perfectly OK" if it left the EU without a deal, Tory peer Michael Heseltine told ITV's Robert Peston that his comments were "rubbish," suggesting that Johnson had mastered the arts of "waffle, charm, and delay."

Watch Heseltine's full remarks below:

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