Price hikes? Travel bans? Food shortages? These are some of the extreme potential impacts being touted as New Year possibilities if Britain and the EU fail to sign a trade deal to take effect when the Brexit ‘transition period’ ends on 31 December 2020.
It is still possible that a deal will be signed. But deep disagreements remain over issues such as fishing rights and competition rules.
So it’s a good time to take a look at what could happen to UK household finances if there is no deal – and what will happen anyway, even if there is an eleventh hour meeting of minds.
What would be the main impact of No Deal?
Without a replacement trade arrangement in place, the UK and EU would have to trade on World Trade Organization terms.
The knock-on effects of this could be wide-ranging. Prices could rise for goods moving between the UK and the EU as new tariffs are imposed. The need for extra border checks could result in long lorry queues at UK ports, with delays to deliveries. Supermarkets have even warned of disruption to the fresh food chain.
Whether or not No Deal happens, we already know that Brexit will impose new border control obligations and requirements on Brits wishing to travel to Europe from next year. The Gov.uk website has more details.
We may also see countries imposing restrictions on British travellers because of the UK’s relatively high rates of COVID.
The most obvious change here is that the traditional burgundy-coloured passport embossed with the words ‘European Union’ is being phased out for UK nationals to be replaced with a blue version instead. It’s not essential for Brits to change their passports straightaway.
From 1 January 2021, travellers visiting most EU countries (in addition to Iceland, Norway, Switzerland and Liechtenstein) must have at least six months left till expiry on their existing passport and for it to be less than 10 years old on the day of travel. The rules are less onerous for Brits making trips to the Republic of Ireland, even though the latter remains as part of the EU.
For UK nationals, foreign countries’ arrivals lounges may have a different look to them from 1 January 2021 onwards. It’s possible that Brits on arrival will need to produce a return (or onward) ticket for travel, demonstrate they have sufficient cash to stay in a particular jurisdiction, and follow different customs lanes from citizens from the EU, Iceland, Norway, Switzerland and Liechtenstein.
Although they won’t need a visa per se, from some time in 2022 (the date is yet to be announced), UK travellers to EU countries will need to buy a one-off €7 (£6.30) visa-waiver for holidays and short stays. The paperwork will be issued under the European Travel Information and Authorisation System and the fee covers a three-year period.
During the transition period, UK driving licences have remained eligible for use in the remaining 27 EU member countries, along with Iceland, Liechtenstein and Norway, which comprise the European Economic Area (EEA).
From 1 January 2021 and depending on the subsequent EEA destination and duration of stay, it may also be necessary to take out an international driving permit. These currently cost £5.50 and are available from the Post Office.
In addition, from next year the Association of British Insurers advises that UK drivers planning to take their vehicles to the EU, including the Republic of Ireland, should make arrangements to carry a so-called ‘green card’ in time for when they travel.
The green card is an internationally-recognised proof of motor insurance that guarantees a motorist has the necessary minimum level of third-party cover. Drivers can obtain one from their existing car insurer with its validity typically lasting for up to 90 days.
Until the end of this year, UK travellers are still allowed to make use of the European Health Insurance Card (EHIC). During a temporary stay abroad, an EHIC holder is granted the same access to a particular country’s state medical care as is enjoyed by its nationals.
From next year, however, the UK government is urging Brits heading abroad to buy travel insurance with healthcare cover before going on holiday. Travellers with pre-existing medical conditions in particular are advised to buy cover relevant to their needs.
At the time of writing, UK state pensioners living in the EU before the end of 2020 will be able to use their EHIC beyond 2020. The EHIC will also be valid for UK students who start a course in the EU before the end of 2020 until their course finishes.
Under the EU Pet Travel Scheme (PETS), UK pet owners wishing to travel to an EU country with an animal such as a cat, dog (including assistance dogs) or ferret can currently do so providing the animal holds a valid EU pet passport.
A passport can be obtained once the pet has been microchipped by a vet, received a rabies vaccination/booster and, for dogs travelling to certain countries, received tapeworm treatment.
From the start of next year, however, the rules change because Great Britain (ie, England, Scotland and Wales) effectively drops out of PETS before looking to re-enter in one of three categorisations: unlisted; Part 1 listed; Part 2 listed.
The final status has yet to be decided and the current advice from the UK government is that pet owners should contact their vet at least four months before their chosen travel date.
This is in case the UK moves to unlisted status which would require blood tests to be carried out on the animal in question and then checked with an EU-approved laboratory, all of which takes time. Unlisted status would also require pet owners to take their animal to a vet no more than 10 days before travel to get an Animal Health Certificate.
There are slightly different arrangements for pet travel from Northern Ireland and more can be found out from the relevant NI Direct Government Services webpage.
Mobile phones and roaming charges
In June 2017, the EU’s ‘Roam Like At Home’ rules were adopted across the EEA. This meant that when, say, a UK mobile phone user made calls or sent texts from anywhere in this jurisdiction they only used their UK allowance (or pay-as-you-go rate) as they would have done at home, subject to ‘fair usage’ rules.
These rules only apply to the end of this year, however, and the UK government has said that mobile providers do not necessarily need to stick to this arrangement from 2021 onwards.
That said, the Three network has told its customers it will continue to give them free roaming from 2021, while provider EE says it has no plans to introduce roaming charges whatever the outcome of the trade talks.
Would No Deal damage the wider UK economy?
Potentially, yes. The Bank of England is on record as saying a no-deal Brexit could inflict more economic cost and damage to businesses than the COVID pandemic. The Office for Budget Responsibility has warned of rising unemployment.
Advocates of Brexit, however, say Britain’s long-term prospects outside the EU are positive.
How would No Deal affect the pound?
The pound declined by nearly 8% against the euro following the Brexit vote of June 2016. Since then, the pound/euro exchange rate has rarely managed to cross the 1.20 mark for any significant amount of time.
A no-deal outcome would, in the short-term at least, very likely exert downward pressure on the pound against the major global currencies, including the US dollar. Some market watchers have predicted pound/dollar parity if no deal comes about.
A weak pound is bad news for would-be travellers looking to buy foreign currency. To offset the worst effects, it makes more sense to buy in tranches rather than exchanging a lump sum of money in one go.