The UK would face a “Pandora’s box of economic consequences” if it exits the European Union without a new trade deal in place, one of Britain’s biggest business lobbies has warned.
If Britain leaves the EU without a trade deal, it would have to rely on so-called World Trade Organization rules, which would immediately raise the cost of trade for both sides but impact the UK more as its relative dependence on EU trade is higher than the EU's on Britain.
Under the “hard Brexit” formula, the UK will lose its preferential access to the EU's single market and suffer from soured relations with other EU members.
"Here in the UK and across the continent firms are worried about this 'worst-case scenario'," Paul Drechsler, president of the Confederation for British Industry, said Thursday at Mansion House in the City of London.
“We should be under no illusions about what this would really mean. A ‘no deal’ scenario would open a Pandora’s box of economic consequences,” Drechsler said.
Drechsler, whose organization comprises 190,000 businesses of all sizes and sectors, said Britain would face tariffs on 90 percent of its EU exports by value and a raft of new regulatory hurdles.
"Some are getting ready for it to reduce economic damage. Some won't prepare because they're hoping for a deal. But in reality many firms can't prepare because the cost of change is simply too high to even consider it," he said.
Under WTO rules, the UK would have to trade with EU member states on terms that govern trade between countries that do not have trade agreements.
The UK government is hoping to conduct its Brexit talks in parallel with negotiations over an ambitious trade agreement during the two-year exit talks.
However, EU officials are demanding that London first give assurances that it will make good on its financial obligations, which it calculates as around 60 billion euros.
British Prime Minister Theresa May is expected to start the official talks on exiting the EU by the end of March. Triggering Article 50 of the EU Treaty will begin two years of negotiations on the terms of the exit.
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