UK plans to slash import tariffs in event of no-deal
By Oliver Haill
Date: Wednesday 13 Mar 2019
(Sharecast News) - The UK will remove tariffs on most imported goods if MPs vote for a no-deal Brexit, the government announced on Wednesday morning as businesses bemoaned the lack of consultation.
In what will be a temporary measure, there will be zero tariffs on 87% of imports to the UK, but tariffs will be kept on farm goods such as meat and some dairy products. As it stands, 80% of imports are tariff-free.
A vote on Wednesday evening will show whether MPs support or reject a no-deal Brexit, a day after Theresa May's Brexit deal was defeated by 149 votes. If MPs vote against a no-deal Brexit, they are scheduled to vote on Thursday over whether they would like a short extension to the departure date.
The government also said it would remove all border checks between Ireland and Northern Ireland bar a "small number of measures strictly to comply with international obligations, protect the biosecurity of the island of Ireland, or to avoid the highest risks to Northern Ireland business".
Northern Ireland Secretary Karen Bradley said: "The measures announced today recognise the unique circumstances of Northern Ireland. These arrangements can only be temporary and short-term."
BUSINESS BODIES INCREDULOUS
The pound was climbing on Wednesday, up 0.6% against the euro to 1.1648 and up 0.5% versus the dollar to 1.3142, but businesses reacted with shock.
CBI director-general Carolyn Fairbairn told BBC radio: "This tells us everything that is wrong with a no-deal scenario.
"What we are hearing is the biggest change in terms of trade this country has faced since the mid-19th century being imposed on this country with no consultation with business, no time to prepare.
"This is no way to run a country. What we potentially are going to see is this imposition of new terms of trade at the same time as business is blocked out of its closest trading partner. This is a sledgehammer for our economy."
Allie Renison at the Institute of Directors said: "While the information provided is the bare minimum needed to mitigate the full impact of no-deal for goods traders in particular, it has come far too late to allow businesses to be ready in just a few short weeks."
While cutting tariffs would be a "necessary and welcome" measure, she said it was "crucial to do so in a measured, open and consultative way", adding that there has been "virtually none of that from government in the run-up to this point".
She concluded: "Making these tariff decisions temporary will lead to widespread confusion about what may change and when, as firms will want to know well in advance about how duties may rise. Such unpredictability may also have consequences for our trading relations with countries outside the EU as well."
Mike Hawes, chief executive of the UK car industry body the SMMT, said the tariff measure announcement "does not resolve the devastating effect a 'no deal' Brexit would have on the automotive industry. No policy on tariffs can come close to compensating for the disruption, cost and job losses that would result from 'no deal'. It's staggering that we are in this position with only days until we are due to leave. Every day 'no deal' remains a possibility is another day companies pay the price in expensive contingency measure. 'No deal' must be taken off the table immediately and permanently."
POUND SKITTISH
Analysts at Rabobank said it appeared that the defeat of May's deal on Tuesday night has increased the chances of a softer Brexit than implied by the PM's deal or other options such as the holding of a second referendum.
"This is a market positive development even though the ongoing uncertainty will of course not be positive for the UK's economy."
Looking specifically at the rise in sterling, Neil Wilson, chief market analyst at Markets.com, said momentum is shifting in favour of a softer Brexit that Parliament can back, which should be the start of a rising channel for the currency - though he warned of short-term volatility and potential downside risks for the pound.
Like the much of the market, Wilson was confident that parliament will firmly reject no-deal and subsequently will be forced to ask the EU for a delay on Thursday.
"This will need to be a purposeful delay and the UK will need a 'plan' as to what it intends to do. Which leads us to Parliament taking over the process, and a likely general election. This extension may well be longer than the short delay many anticipate, although European elections this spring make it troublesome and a snap poll and fresh Parliamentary mandate would be possible in a relatively short space of time. However, negotiations on a new deal would take longer."
With the Thursday's extension vote, "we could be looking at the same hole in a few weeks or months", said Naeem Aslam at Think Markets.
"There is no assurance that another few months are going to resolve this issue given that the politicians have not achieved anything in the past two years.
"It is this particular factor which I think the market participants are largely undermining. Kicking the can down the road doesn't really resolve anything for this matter."
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