What does a no deal Brexit mean?

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Brexit negotiators have until the end of today to hammer out a deal between the UK and EU, or else face a no deal Brexit. Negotiators from both sides have been discussing key sticking points through the early hours, and Prime Minister Boris Johnson will speak with European Commission president Ursula von der Leyen on Sunday. Both sides have cautioned a no deal is the most likely scenario.

Discussions have been ongoing throughout the weekend, with progress described on Saturday as “very difficult”.

However, officials said the Prime Minister is determined to explore every option to secure a free trade agreement.

Sticking points include fishing, fair competition on business and how any future disputes will be resolved between the UK and EU.

The UK’s transition period will end on December 31, and dependent on talks today could mean the country exits the Bloc with no deal on January 1.

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But what exactly does no deal Brexit mean?

Current odds from Smarkets place the chance of a Brexit deal at just 37 percent.

Smarkets Head of Political Markets, Sarbjit Bakhshi, said: “As negotiations between the UK and the EU enter their final phase, both sides are ratcheting up the tension with the European Commission asking member states not to allow mini-transition-period extensions and the Royal Naval on standby to block European fishing vessels in the event of a no deal outcome.

“Although the chance of a deal is a long way down from its high of 89 percent three weeks ago, recent developments, such as the UK dropping attempts to breach international law and allowing checks between Great Britain and Northern Ireland, suggest that a deal in 2020 is still within grasp, if still somewhat unlikely at 37 percent.”

If the UK exits the EU with no deal, trade would automatically revert to World Trade Organization (WTO) terms.

WTO terms are the basic rules for countries without trade deals.

There are 164 WTO members and if they haven’t agreed on free-trade agreements with one another, they trade under basic “WTO rules”.

WTO rules state the same trading terms must be applied to all WTO members unless there is a trade agreement between two or more countries.

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This is known as the Most Favoured Nation (MFN) treatment.

MFN means the UK cannot offer better trading terms to one country and not another, unless through a trade agreement.

The UK currently trades with many countries on WTO terms, for example, China, India, Brazil and Saudi Arabia.

In the event of a no deal, the EU would impose taxes – known as tariffs – on goods exported from the UK.

Non-agricultural products on average are taxed 2.8 percent, while this increases to 10 percent for cars and more than 35 percent for dairy products.

Any lorries arriving in the UK or entering the EU may face delays as more border checks are likely.

Some fear this could mean EU lorry drivers avoid the UK in order to skip the delays.

Fresh food, in particular, may be affected, with some supermarkets warning there may be less choice.

The Government has ramped up preparations for a no deal when transition arrangements end on December 31.

Mr Johnson has taken personal control of ensuring the country is ready.

The PM is spearheading a committee known as ”Super XO” which will oversee preparations as ministers look to ensure food, medicines – including coronavirus vaccines – and other critical goods can continue to reach the country uninterrupted next year.

The Confederation of British Industry (CBI) has called for “grace periods” to be agreed so businesses do not face a “damaging cliff edge” if there proves to be no meeting of minds on a deal.

In a move which likely angered EU leaders, a Government spokesman revealed the UK had “run live exercises” which involved scrambling “naval vessels to respond to threats of illegal fishing in our soon-to-be sovereign waters” as part of readiness efforts.

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