Theresa "Brexit means Brexit" May keeps repeating that she will walk away from the EU with no deal rather than accept a bad deal. She has often said the UK will rely on WTO trade rules rather than sign a deal with Europe that was not as good as we already have.
Let me be blunt here:
No deal isn't a bad deal. It is the very worst deal and only a complete and utter lunatic would consider it an option! Or someone completely isolated from the disastrous consequences of a no deal by significant wealth and international corporate contacts!
This is a single very simplified example of the result of trading under the World Trade Organisation tariff.
In this case meat and cheese, which draw a 40% tariff (UK export of prepared Meat is 39.9%, unprepared meat is 37.8% tariff and Dairy produce is 39.4% under WTO trade rules).
Let's look at a very simple case, UK suppliers make up boxes of meat and cheese for export, each box costs £90 to make and they sell them for £100, not much profit margin there.
Now the UK sellers have three options:
Option one is sell at full price, so no one buys, they make no money and go out of business.
Each £100 box is hit by the WTO tariff as it gets exported to the EU so costs £140 in the European market place. Local EU meat and cheese boxes which are traded inside the EU or come from nations that have trade deals with the EU do not pay the tariff so they are still being priced at £100.
Which means the UK goods are immediately priced out of the market, people may love Welsh lamb and English cheddar but it's now £140 a box where as French lamb or new Zealand lamb and French cheese is only £100 a box. So everyone buys local and no one buys the overpriced UK stuff.
Option two is to sell at cost, which for the meat and cheese box is £90. The WTO 40% tariff means that in Europe each box will cost £126. Which is still a lot more than the local goods but they might get some sales from people who are happy to pay over the odds because they really like that Welsh lamb, highland beef and English cheddar. But they aren't going to sell anywhere near as much as they normally do so not only are they making no profit which means they have no money for unexpected repairs or buying new machinery, they are still going to be making a loss because they are too expensive and will be easily undercut by the Europeans and won't be selling as much anyway.
Option three is to cut the selling price enough to be competitive, take a loss and hope to hang on long enough to survive. To do this the boxes would need to be reduced to £70, a £20 loss for every box actually sold. The WTO tariff of 40% then pushes the sale price up to £98 which is competitive in Europe, so they can sell their boxes and the Europeans will continue buying them.
BUT! They are losing money for every box they sell. With the boxes costing £90 to actually make that cheese and grow those lambs selling them at £70 means a loss on every box. If they sell 1,000 boxes each year they will be losing £20,000 a year. So if the bank is happy to let them go into debt by that much each year, and if they don't have anything break down and need an expensive repair, and if they can manage to keep the business running with less than break even prices then they can hang on to their market.
Perhaps even long enough for a trade deal to be negotiated which would remove the WTO tariff and let them go back to selling at £100 a box.
But these trade deals take 5 - 10 years, generally around seven. So they would need to hang on for probably seven years, running up debts of £140,000 plus interest IF the bank is happy to let them have more debt that their entire annual turnover. IF they can hang on then they can slowly begin to pay back that debt from their surviving market. Though at £10,000 a year profit it's going to take two decades to pay off the debt and interest and charges.
This is only a very simplified example as a proper and detailed explanation of JUST meat and cheese would take hundreds of pages and I don't have the time to write any more books right now.
Anyway this isn't just the only problem.
If the seller goes with option three and they survive long enough for the new trade deal they will still have their market, but for anyone else who stops selling in Europe they will have another significant problem.
As the UK meat and cheese boxes become too expensive and are priced out of the market people will still be buying meat and cheese, so the local providers and international suppliers with trade deals will work to increase their own production, selling more of their stuff to make up for the gap in the market caused by the UK goods no longer being around.
After a couple of years they will have completely replaced the UK cheese and meat in the European markets, and by the time the UK gets that trade deal done the customers will have been buying French cheese and French or new Zealand lamb for as many as five, seven, ten years. The UK goods will be a distant memory and the market will be full, so any UK seller will not only be coming into a saturated market, but they will be coming into what amounts to a NEW market.
UK cheese and meat will be the new product, trying to compete with the established products that people are familiar with, always an uphill struggle.
So either our cheese and meat companies will have been forced to run up huge losses and struggle to survive long enough for the trade deal to be finished, with the advantage that they will still have a market share, but also huge debts, OR, the old exporters will have gone out of business and the new ones will be starting from scratch fighting to break into a market that has forgotten about UK goods years ago.
This is just meat and cheese, the tobacco industry is going to be hit by 40% on imports and 43% on exports and how much tobacco does the UK grow itself ? Or how about all that cane sugar we import, 30% tariff, and all sugary sweets and confectioneries also catch that 30% tariff. Or us exporting beat sugar or any sweets and confectioneries 31.6%.
Flour, 25% in or out and we import huge amounts of flour since we can't grow enough grain to make the bread we eat.
The tariff on cars and motorised vehicles at 10% is relatively minor in comparison. Though with car exports which is a multi billion pound business the falling pound will keep the price of UK built cars down, unfortunately the price of imports has the same tariff and as the pound weakens to make exports better imports get worse and worse, which includes all those imported car engines and parts, which makes UK built cars more expensive which hurts exports.
And round and round and round we go.
Then we have imports. We as a nation import huge quantities of food, we simply do not grow enough to feed ourselves, food that will attract WTO tariffs that will significantly increase our shopping even without taking a weak pound into account.
Now some of our exporters can sell to the UK market instead, which allows them to make some sales, but remember, the UK imports a lot of food, we are not and cannot become self sufficient in food production, meaning you will still be buying imported food and your weakly shop can be easily 20+ % more expensive each week.
As I said this is a very simplistic way of looking at the situation because I don't have time to add another entire book to my workload. But by all means Google and read if you are having trouble sleeping at night.
Theresa May and her no deal would be an economic NIGHTMARE for the UK, exports would be devastated, imports would go up and up in price, we would be paying more and more just for the sort of things we normally buy.
People with jobs in those exporting companies would be losing their jobs because they won't be exporting any more or would be exporting far less, and looking at more expensive bills each week.
This doesn't cover the unbelievably huge loss of tax revenue when the City banks all fuck off to Europe because under a no deal they wouldn't be able to do business in the EU from the UK, or the economic impact of lost revenue for failing exports AND higher import prices.
Various people who should know what they are talking about, you know, those expert types, estimate that we are looking at a loss of export business with the EU alone at between 30% and 50%.
That's between £72 billion and £120 billion. That's BILLION, with a B.
And that's just our closest trading partners.
AND that's our exports!
We imported last year something in the region of £300 Billion from the EU alone, that's BILLION, with a B. With estimates of the increase in the cost of the goods and services we IMPORT anywhere from 20% to 40% that is looking at £60 to £120 Billion we would be paying extra each year just to import the stuff we buy now, and that's just from the EU. Oh and that's BILLION, with a B in case you missed it.
A year ago, if you were reading my rantings back then you may remember that I was of the opinion that we could make a deal with Europe, because they sold us more than we sold them, reasonable people could sit down, diplomacy would happen and the whole thing could be sorted out.
I am now a year older and a year wiser, I have seen the prevailing political attitude in this country, the deliberate efforts on the part of our political leadership to PISS OFF the rest of the EU and to make a fair and reasonable deal all but impossible.
Nations conduct diplomacy to try and seek agreements that benefit everyone.
Corporations try to do deals that get them the best possible benefit and FUCK everyone else.
Our government seems hell bent on negotiating a Corporate deal with the EU, not reaching a diplomatic arrangement. May's NO DEAL is more and more likely.
What we are looking at is an economic collapse. Outside of London an economic depression and inside London probably just a recession because London is treated as a separate entity.
An actual depression. Unemployment at the levels seen in Greece, economic collapse at the level seen in Greece. In fact if you want to know what will happen when the UK economy crashes out and no one will lend us money to run up the huge debts needed because tax revenue has fallen through the floor.
Look at Greece.
I don't know about you but I find that prospect bloody depressing.