A no-deal Brexit will take a pound on the pound
By Daniel J. McLaughlin
For better or for worse, Britain will leave the European Union at 11pm on March 29, 2019. The worst will be if Brussels and Westminster have failed to reach an agreement on the parting of the ways.
Once 11pm strikes in the UK, and there is no formal withdrawal treaty between the two, all EU rules and regulations will instantly cease to apply to Britain. Customs, trade, travel or citizens' rights in both the country and the bloc will be impacted. A transition period from March 29, 2019 and December 31, 2020, meant to smooth things out and help businesses and organisations the time to respond to the changes, will be gone.
Britain will be alone with no ties to the European Union. This date was already set when Theresa May decided to trigger Article 50 last year, formally notifying the EU about the UK's departure, and starting a two-year negotiation period. It has been a frustrating experience for both sides, and with their many disagreements, they are preparing for the worst: a no-deal Brexit.
The EU could choose to extend the two-year negotiation period, but they would need the approval of all 27 member states. Time is running out, and so is the prospect of Brussels and Westminster failing to reach and agreement before the deadline.
There are, of course, political ramifications from a no-deal Brexit, but how would it affect the everyday lives of Britons?
It will hit the pound. In fact, it has already done that. Following the EU referendum vote, it was estimated that the fall in the pound cost the average household about £400-a-year. As Metro warns, the first impact of a no-deal Brexit would be felt not next March, but well before then as financial markets push the pound down. "A further fall in the pound will push up inflation by making things we import more expensive, and will reduce the real value of our wages," they explain.
The pound is already sensitive to the language of Brexit - something as consequential as a no-deal Brexit will likely hit it harder and faster. You just have to look at what happened with the comments from the Bank of England governor Mark Carney. The pound fell briefly below $1.30 amid disappointing economic figures and the no-deal fears. It rose again immediately when the Bank of England increased the interest rates, and then dropped again when Mr Carney told the BBC there was an "uncomfortably high" risk of a no-deal Brexit.
Britain relies heavily on imported goods, and therefore a no-deal Brexit would risk "an inflammatory surge in consumer prices", according to the Financial Times. It could have a knock-on effect on a multitude of things from housebuilders to retailers already feeling the pinch, holiday companies and airlines to car manufacturers, as UK citizens spend less amid the uncertainty.
A no-deal Brexit is the worst case scenario for both Britain and the EU. As it looms ominously, the prospect of an acrimonious split from the bloc is already hitting the pound - and giving a small taster of the potentially bigger pounding that is yet to come.