David Davis tells MPs analysis of potential economic fallout has not been carried out since he became Brexit secretary

The government has not carried out a full assessment of the potential economic impact of Britain leaving the EU without a trade deal, the Brexit secretary has told a committee of MPs.

One government forecast was made before the referendum on 23 June, but no new study had been carried out while he had been Brexit secretary, David Davis told the exiting the European Union committee.

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Davis, who reiterated the government’s view that leaving with no deal was better than agreeing to a bad deal, argued that modelling the repercussions of a default to World Trade Organisation (WTO) arrangements was impossible without knowing what mitigation measures could also be put in place.

Davis’s comments came as the legislation granting the government the power to trigger Article 50, the formal process of exiting the European Union, is expected to be granted Royal Assent. Whitehall sources confirmed that the Queen was expected to have signed the bill - the final step before it can become law - by Thursday morning.



Under detailed questioning from the committee chair, Labour’s Hilary Benn, Davis agreed that leaving without a deal would mean the imposition of WTO tariffs for trade with EU states, and the possibility of some border checks.

Asked if an assessment had been carried out of the overall impact of this on the economy and businesses, Davis said: “They made an estimate during the referendum campaign, but I think one of the issues that’s arisen is that those forecasts don’t appear to have exactly been very robust since then.”

This did not mean the issue was not being considered, Davis added, saying he had briefed the cabinet on the need for contingency planning in case no deal was possible at the end of the two-year Brexit process.

“This is part of an ongoing process that started last year,” he said. “And it’s rigorous across every department of state, every single one. It ranges from customs through to agriculture and what we do there, to nuclear safety – every single department of state.”

Asked why an overall assessment had not been done, he replied: “Much of this is about mitigation. Any forecast that you make depends on the mitigation. As a result, it is rather otiose to do the forecast before you have concluded what mitigation is possible.”

Davis argued that as big an issue as tariffs were potential border delays, which could possibly be avoided through the extension of electronic, light-touch customs checks after Brexit.

Under such “authorised economic operators” arrangements, more than 90% of cross-border traffic can be cleared in five seconds, Davis said.

“Until you have an answer to that, the assessment of what the economic impact of these customs (checks) is not possible to calculate. The simple truth is that you’ve got to do this in sequence,” he said, saying similar uncertainties existed in areas such as agriculture.

“All of these things are being done piece by piece. When we have finished making the Lego blocks, we will build the house. And then we will have the forecast you are talking about.”

Davis also argued that a no-deal exit could potentially have benefits, in that the UK would be freer to reduce tariffs and barriers with non-EU states.

“The prime minister said no deal is better than a bad deal,” he said. “Why did she say that? She said that because in the emotional aftermath of the referendum, with lots of threats of punishment deals and all the rest of it, I made it clear that actually we could manage this in such a way as to be better than a bad deal. And this is true.

“I can’t quantify it for you in detail yet. I may well be able to do so in about a year’s time. But it’s certainly the case. It’s not as frightening as, frankly some people think. But it’s not as simple as some people think.”

However, Davis added that he did not think leaving without a deal would be ideal: “I think it’s not as good an outcome as a free-trade, friction-free open agreement, which is why we’re trying for that.”

Davis’s comments came after he and the other two main Brexit-focused ministers – the foreign secretary, Boris Johnson, and Liam Fox, the international trade secretary – talked at length at the weekend about the prospect of leaving the EU without a deal.

While Fox said it would be bad for the UK and the rest of Europe, Johnson suggested Britain’s economy “would be perfectly OK”.

The foreign secretary was immediately contradicted by Carolyn Fairbairn, head of the Confederation of British Industry, who said such a move would be bad for businesses and “a recipe for chaos on a number of fronts”.