Sunday 12 March 2017 9:16 am

Article 50: Six risks of a Brexit "no deal", as MPs warn Theresa May to plan now for negotiation failure

"No deal is better than a bad deal" Theresa May famously said, outlining her big plans for Brexit last month.

But now an influential group of MPs have told the Prime Minister she better start planning for a "no deal" scenario just days before she's expected to start the firing gun on the UK's official exit from Europe by triggering Article 50.

A fresh report from the cross-party group of MPs on the Foreign Affairs Select Committee has warned that "a complete breakdown in negotiations represents a very destructive outcome leading to mutually assured damage for the EU and the UK" based on evidence from law experts, the former EU commissioner Sir Ivan Rogers and others.

Read more: Key EU negotiator wants Britons to keep their EU rights after Brexit

While there are scenarios where no deal might be better than a bad deal, they concluded that rather than being "an exercise in guesswork", evidence suggests there are serious implications. The Bar Council found no deal "could lead to a short, sharp shock, rather than a lengthy period of economic dislocation and political acrimony" and a "favourable outcome would be far from certain."

It pointed to six areas in particular:

1. An ongoing dispute over the UK's exit bill – how much the country will be liable for in outstanding cash it must pay to Europe. 
2. Uncertainty and confusion over EU citizens in the UK and UK citizens in the EU, including tourists and short-term travellers as well as those living and working in the two areas.
3. Trading on terms set out by the World Trade Organisation (WTO) is likely to mean the immediate imposition of tariffs across sectors, and there are questions over the legality of free trade agreements (FTA) agreed with non-EU countries by the EU.
4. A gap in regulation not covered by the Great Repeal Bill that would leave the UK likely "playing catch-up" to close these legal and regulatory gaps across sectors.
5. How the UK would participate in shared security policy.
6. The return of a customs border between Northern Ireland and the Republic of Ireland. Exiting the customs union without a deal in place means there would have to be some form of customs checking arrangement put into place.

Read more: Article 50 Bill could be approved by parliament as soon as Monday

‚ÄčThe committee chair Crispin Blunt, Conservative MP for Reigate, said the possibility of "no deal" was "real enough to require the government to plan how to deal with it" and that a failure to do such would be "a dereliction of duty".

"There is no evidence to indicate that this is receiving the consideration it deserves or that serious contingency planning is underway," he said.

"The government has repeatedly said that it will walk away from a 'bad' final deal. That makes preparing for 'no deal' all the more essential. Such preparation reinforces that stance. Last year, the committee described the government’s failure to plan for a Leave vote as an act of gross negligence. This government must not make a comparable mistake.

"The Article 50 negotiations will hopefully be successful. There is a clear shared UK and EU interest in reaching agreement. Mutually assured damage is the alternative. The responsibility on the negotiators is substantial. But there is a real prospect that negotiations will fail. The government should therefore require each department to produce a 'no deal' plan identifying the likely consequences and making proposals, including guidance to individuals and businesses, to mitigate potential risks."

However, ministers have rallied to counter the report, saying the government has been making contingency plans