Fears over the impact of a “no-deal” Brexit have risen again following the leaked “Yellowhammer” document which details government concerns around the potential fallout of a no-deal Brexit. Here are the top ten takeaways from the report.
The report details that the current October 31st (Halloween) leaving date is “not to our advantage”.
The date falls on a Thursday. This means that the bank would have to implement changes overnight, instead of being able to do it over a weekend. Furthermore, as the next day is the end of the UK half term, it means that many families will be returning from abroad, creating extra traffic at borders.
The document projects that major disruption at channel ports could last as long as 90 days following the Brexit date. It showed that up to 85% of lorries “may not be ready” for French customs. The report also states that in a “reasonable worst-case scenario”, the disruption could cause delays of up to 2.5 days for heavy goods vehicles which could have a significant impact on perishable goods. France has confirmed that it will apply mandatory EU controls immediately following Brexit.
Yellowhammer suggests that the supply of medicines to the UK could be heavily impacted. The report stated that it won’t “be practical to stockpile products to cover the expected delays of up to six months”. Additionally, the report shows that it could be more difficult “to prevent and control disease outbreak”.
The report notes that “some UK cross-border financial services will be disrupted”. It claimed that banks and other institutions will need to switch to new systems for reporting transactions midweek. Additionally, the risk of a large drop in GBP could also impact main financial services firms.
Yellowhammer outlines that two UK oil refineries might be “inadvertently” put out of government. This is due to government plans to set the majority of import tariffs at 0% following a no-deal Brexit. Such an outcome could results in a loss of around 2000 jobs, raising the risk of protests and strikes which could impact supply in some areas.
The report also notes concerns over the border issue with Northern Ireland. It claims that measures to avoid a hard border are likely “unsustainable”. The document says that measures to “avoid an immediate risk of a return to a hard border on the UK side” are “likely to prove unsustainable because of significant economic, legal and biosecurity risks and no effective mitigations to address this will be available”.
Furthermore, the report notes that the people of Northern Ireland face “significant” energy price increases. This is due to a severe “split” in the single electricity market which was put in place following the Good Friday Agreement.
Worryingly, the report also highlights the potential for mass protests and the threat of riots as a result of “the shock of a no-deal departure”. Police chiefs have been in months of consultation, preparing plans on how to deal with “a rise in public disorder and community tensions” in the event of a no-deal Brexit.
The Yellowhammer report says that the country’s social care system which is already “fragile”, could be hit hard by increased costs. The report notes that a jump in inflation could see some providers going bankrupt by soon as New Year 2020.
The leaked document highlights that the supply of goods such as foods and medicines to, as well as shipments of waste from, the UK controlled Gibraltar, could be impacted by Spanish customs checks at the border. Around 15,000 workers cross the border between Spain and Gibraltar each day. They could face massive delays of up to four hours for up to a “few months” which could “adversely impact Gibraltar’s economy”.
With Brexit uncertainty keeping investor sentiment subdued, GBPUSD is back under pressure today. Price is still hugging the lower line of the bearish channel which has framed price action over the year. For now, GBPUSD is still above the 1.20 lows though while below the 1.2382 level, focus is on further losses.