Crash out Brexit threatens ‘economic cold war’ between UK and EU

Britain risks an "economic cold war" with the European Union if it crashes out without a deal over the summer, the UK's former ambassador to Brussels has warned.

Sir Ivan Rogers, London's chief negotiator with the EU in the wake of the Brexit referendum, said suggestions of a managed and amicable no deal being pushed by hardline Leavers is "somewhat dangerous".

Such a scenario would, in the event, be “very messy, potentially quite conflictual and pretty unpleasant”, he said, having a “tumultuous” impact on the UK economy that could last for a long time.

Mr Rogers also cautioned that if, as reported, Theresa May is seeking only a short extension to the UK's deadline for leaving the bloc, it would heighten the risk of a no deal Brexit in the coming months.

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"As recently, as last week her effective deputy David Liddington was saying that applying simply for a short extension in the absence of a deal would be a downright reckless thing to do," he said.

“We don’t yet know whether it is a short extension with some implication that in principle it could be lengthened or whether it is purely a short extension.

“If it is a short extension, what David Liddington was saying last week suggests a heightened risk of a no deal outcome during the summer.”

Mr Rogers said in the event of a crash out, World Trade Organisation rules would only cover a proportion of the economy with "multiple sectors" being "radically affected".

Walk away

“I struggle to see how a no deal outcome this summer could be very amicable and I think the European side of the table will inevitably say we negotiated in good faith this withdrawal agreement with you, that contained both the backstop and your agreement to meeting financial obligations of a significant scale,” he said.

“If they then see the Brits walk away from the financial obligations and the backstop, the natural reaction of the 27 member states will be to say ‘well, we’re not even going to open trade negotiations, economic negotiations until you come back to the table with the same offer’.

“That is recipe for a very conflictual summer. That is a state of affairs that could last for rather a long time if we lurched into that by accident.”

Mr Rogers said the corollary of Britain dismissing the agreed backstop guarantee on the Irish border with the EU and its financial settlement for leaving could be “emergency measures agreed solely” among the 27 members states which would dictate to Britain “the state of the world that will actually exist.”

“We are then in a sort of economic cold war which is what would worry me, that the UK would say we are not paying up and the backstop doesn’t exist and we are not prepared to go down the route we negotiated over the last couple of years,” he told RTÉ Radio.

“The natural European reaction is to say that is all very interesting, but these talks have collapsed and in those circumstances we are not prepared to open the negotiation for a subsequent free trade agreement.”

Striking the withdrawal agreement had been a “lengthy and tortuous process”, he said, and any new arrangement is “not going to be the easiest trade deal in history.”

“All other trade deals in history have been between two partners, two blocs, or two nation states seeking to get closer together and gradually to remove and ultimately eliminate trade barriers between them,” he said.

“This would be the first trade negotiation in history by partners trying to get further apart.

“We chose to leave the European Union - that has some automatic consequences in terms of the re-erection of barriers we have spent last 30 or 40 years eliminating.

“So there will be extra frictions, extra problems in our trade with the EU, that is just a fact of leaving.”

Mr Rogers also voiced his concern that both the UK and the EU “are potentially misreading each other’s behaviour in the event of a disorderly breakdown, and making rather blithe confident assumptions about what the other side would do.”

“If I look at this now as an outsider, I think both may be miscalculating what would happen in the event of a no deal,” he said.

“I think it would be very messy, potentially quite conflictual, pretty unpleasant, with a lot of name-calling from both sides about who was responsible for the breakdown and intransigence on both sides.”

Mr Rogers resigned suddenly from his post in January 2017 after coming under criticism from some MPs when a leaked memo revealed he believed a Brexit trade deal could take a decade to secure.