No-deal Brexit: what would it mean?

What is no-deal?

No-deal refers to the situation that occurs if no agreement is made between the EU and UK before the 29^th of March 2019 – the day the UK is due to leave the EU.

In this instance, the UK would trade with the EU on World Trade Organisation (WTO) rules, which is the framework for basic global trading to which most countries in the world have signed up and use where there is no bilateral, multilateral or organisational trade agreement between the trading entities.

While some Brexiteers claim that such an outcome is easy from a bureaucratic perspective, this is not quite the case. The UK would still need to establish procedures and schedules for trading under WTO rules, which they currently do not have. If a no-deal were to be likely, significant effort will need to be made by the UK government to create such procedures and schedules in time for the UK leaving the EU. If not, the UK would be inhibited in its trade ability post-Brexit.

What does this mean for the data and marketing industry?

The government white papers on the impact of a no-deal Brexit were not very helpful in informing the industry about what would happen to data flows in the event of a no-deal. The government has indicated that both the EU and UK would like to agree on a data agreement (also known as an adequacy agreement) between the two jurisdictions, which would allow the continued transfer of data. Nonetheless, this is not guaranteed and there is a likelihood that such an agreement could only be made after the UK has become a ‘3^rd country,’ which would mean there would be a break in data alignment from the moment the UK left the EU until such an agreement was reached.

Without an adequacy agreement in place, UK organisations would need to find an alternative legal basis if receiving personal data from the EU. This is a bureaucratic and potentially costly process for businesses who may need to change company-wide processes to accommodate this. Such uncertainty or difficulty may encourage EU-based businesses to change their company structure so that they are based in the EU, and it may mean UK businesses will not be able to market to customers in the EU if their data practices aren’t changed in time.

One of the concerns of industry is regarding continued access of skilled workers from both the EU and UK to the others’ markets. Under no-deal, the UK government would have full control over immigration controls. While they have made it clear they intend to make it possible for businesses to attract skilled workers (those who will earn over £30k) in a post-Brexit immigration system, this would need to be agreed with the EU separately before they could fulfil such a policy.

In the event of no-deal, Theresa May says the rights of EU citizens currently in the UK will be protected. In other words, there won’t be mass deportations of citizens – a guarantee that some would argue shouldn’t have to be made.

DMA CEO, Chris Combemale, said: “In short, a no-deal Brexit is antithetical to the interests of the data and marketing industry as a whole. A no-deal on data would cause immediate and complete ceasing of UK data-flows with EU countries, a practice through which enormous amounts of business is conducted. Indeed, 75% of the UK’s cross-border data flows are with the EU. Having lobbied this position for months, we know that the government understands the ramifications of this. We shall continue to impress upon the government and our EU partners the importance of getting a deal on data.”

Will it happen?

Currently, only a portion of the Conservative party and a handful of other MPs want to leave with no-deal, and even the hardliners stipulate that they would be happy with a no-deal in the event the EU and UK couldn’t reach a Canada+ agreement.

Following the EU’s rejection of Theresa May’s proposals in September, she reiterated her preference for a deal, but that there were two areas stopping them from reaching agreement.

1. Economic issues

She says EU are saying the UK can either stay in EEA and Customs Union which wouldn’t give us the Brexit people asked for, or have a free trade agreement akin to Canada, which would mean customs checks and a hard border with Europe and leave NI in customs union etc. Neither are satisfactory to her.

2. Northern Ireland

Any deal can’t have a border with NI, or make any agreement that would ‘break up the UK’. A backstop needs to be put in place to assure that there will not be a border (temporary or otherwise) between NI and Repub. Of Ireland if a deal is not made in time. The EU says this means NI will need to stay in the customs union in the meantime. TM says that will break up the UK and is not acceptable.

She said that the EU needs to make suggestions as to what might work. She claims it is ‘not acceptable’ to reject proposals without giving answers as to why and offer a counter-proposal.

In the Prime Minister’s party conference speech reaffirmed that ‘No deal is better than a bad deal’ and drew lines in the sand on the above issues, saying that neither a breakup of the UK or unsatisfactory economic agreement will be accepted.

In reality, a no-deal is unlikely. However, the Parliamentary arithmetic does not currently permit the government to pass the Chequers deal. Therefore, the government has a few options:

1. Extend the time period and re-negotiate a deal and re-propose to parliament
2. Adopt the Canada+ proposal and agree with EU (potentially with a negotiating extension period)
3. Call a general election to win a mandate for her proposals
4. Call a referendum on with potentially any of the options of Chequers deal/remain/no-deal on the paper
5. Choose to crash out with no-deal with the EU

Choosing no-deal off the cuff would seem drastic as a first point of call. While choosing a general election may be risky, especially given last time, the threat of a Labour government may be the only way she can force her party and the country into line behind her proposals.