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Ministers May Have To ‘Manage Decline’ Of Industries In A No-Deal Brexit, Think-Tanks Warn

The government could be forced to “manage the decline” of industries like car manufacturing and dairy farming in the event of a no-deal Brexit, two highly respected think-tanks have warned.

A “very, very large” number of sectors would feel the impact of trade barriers like tariffs and regulations if the UK leaves the EU without a deal, Institute for Fiscal Studies (IFS) deputy director Carl Emerson said on Monday.

Ministers would be forced to target support at industries that would suffer the most, and choose whether to manage their decline or help them navigate the initial shock in the belief that they could adapt and thrive.

Under a unilateral free trade approach backed by hard Brexiteers like David Davis, with zero tariffs on all imports, industries like dairy farming would all but disappear, the Institute for Government’s (IFG) chief economist Gemma Tetlow suggested.

It comes after HuffPost UK reported last week that the government was looking at potentially cutting all tariffs on imports to zero.

The pair were responding to questions at a Westminster event about how the government might respond to the UK leaving the EU without a deal on March 29 and reverting to World Trade Organisation rules for trade.

The response would be multi-pronged, Emmerson said, with increased spending for certain departments like HM Revenue and Customs so it could manage the introduction of checks at borders.

If there was a big shock to consumer and business confidence, ministers could look to stimulate demand by cutting interests rates.

But this may not be possible as interest rates are already very low at 0.75%, so the chancellor could take measures such as temporarily cutting VAT or announcing a future rise in VAT, as both would encourage spending by making goods cheaper in the short-term, Emmerson said.

Businesses could be helped by more direct public sector investment and cuts to corporation tax, he added.

Article source: https://www.huffingtonpost.co.uk/entry/ministers-may-have-to-manage-decline-of-industries-in-a-no-deal-brexit-think-tanks-warn_uk_5c6175f7e4b0f9e1b17fd1e6

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