By Guan Zhaoyu    Source: CGTN    Published: 2018-9-20

The leaders of EU members met in Salzburg, Austria on September 19 for two days, and Brexit is the major issue of the summit. Although it is not an official summit, the whole Europe pays much attention to it due to its topic.

Until now, there has been no trade deal signed between the UK and EU. So is there any possibility for the UK to Brexit without the deal and what are the potential results of Brexit concerning the UK, the EU and other regions?

Possibility of "no deal Brexit"

Theresa May's office repeated on Monday she believed Britain would negotiate a good agreement but that “no deal is better than a bad deal.” A no-deal would mean scrapping a 21-month transitionary exit period on March 29, 2019, and the exit would be immediate.

An instant exit would, however, mean that the UK would have no legal obligations to pay a 39 billion-pound divorce bill to the EU, according to a House of Commons report.

Under the Article 50 of the Lisbon Treaty (that is, the clause on withdrawal from the EU), even if the negotiations fail, Brexit can still be valid, so there is no legal obstacle to “no deal Brexit.”

During the negotiation process, as is argued by Oliver Patel (2018) from UCL European Institute, what the UK wants is to be treated differently from other third countries, to retain a seat at the table in key policy areas, much cooperation to continue unchanged, frictionless trade in goods and no hard border in Northern Ireland.

However, what the EU wants is no special treatment for the UK, to be treated like any other third country, no cherry picking, indivisibility of single market, Britain to be seen to be worse off – must be a cost to leaving.

While this would leave a gaping hole in the EU budget and sour relations, it would be a massive saving for the UK. In addition, Theresa May has already published various plans and guidance in many areas to prepare for no deal Brexit.

The UK's main focus regarding a potential Brexit deal

The economic consequences of leaving the EU will depend on what policies the UK adopts the following Brexit. It is estimated that the effects of Brexit on trade and the UK's contribution to the EU budget would be equivalent to a fall in income of between 1.3 percent and 2.6 percent (850 to 1,700 pounds per household per year).

And once we include the long-run effects of Brexit on productivity, the decline in income increases to between 6.3 percent and 9.5 percent (about 4,200 to 6,400 pounds per household per year).

The camp that advocates Brexit said that once the UK leaves the EU, the UK can get an additional 350 million pounds a week for the National Health Service (NHS). This number is so attractive that it cannot be ignored, and it is easy to understand. It is undoubtedly politically convincing and appealing to voters of all ages.

Therefore, the Brexit camp is trying to play the NHS card. The number itself may not be able to withstand scrutiny, and it is controversial. Others describe it may mislead voters, but this does not reduce its lethality.

Immigration is a trump card for the Brexit. The issue of immigration is a concern of many people. It is also related to the national and cultural identity of the UK. In particular, some low-income British voters are more willing to leave the EU to limit the influx of immigrants. People are worried that the immigration problem in the next 20 years may be more serious. The most crucial thing is that the Brexit contends that the EU will not be able to control its borders, which has caused many British people to resonate.

The struggling Brexit process

There are different opinions within the UK. Government officials' opinions are not uniform within the cabinet and parliament. Theresa May's plan is against by senators. The UK and the EU are also at odds over the sovereignty of Northern Ireland.

On the judicial side, Britain wants its justice to be completely separate from that of the EU. However, the legal process of leaving the EU is tedious and slow.

Besides, there are a lot of people who need to agree with each other in EU parliament.  Although the date the UK is meant to leave is 29 March 2019, there are already plans for a 21-month transition period after that, during which, some EU laws could still govern the UK.

Another critical issue needed to be pointed out is, UK-China relation could be unpredictable after the UK breaking up with the EU. The relationship between British and China is not only constrained by the radical change to Brexit but also affected by the fact that the UK would be more dependent on the US after Brexit.

Under the background of US-China trade conflict, Britain is more inclined to hedge-off foreign policy. As we have already seen, it provoked in the South China Sea on the one hand and approached China's economy and trade on the other hand. Anyway, the complexity of the UK-China relations is never to be underestimated.

Guan Zhaoyu is an associate research fellow at the Chongyang Institute for Financial Studies of Renmin University of China.