This is something which should make any Brit terrified of a no-deal Brexit.
There's a lot of bravado by Brexiters making statements along the lines that the threat of withholding the "divorce settlement" will force the EU to compromise. It's actually not much more than pocket change in their calculations.
The payments would be spread over many decades, but they are front-loaded. I've seen a figure that about 60% would be paid in the EU's next seven-year budget starting soon after the UK leaves the EU. That's about 23B pounds, less than 30B euros. The EU's total budget for that period is about 1,500B euros. They'd need to fill a hole of less than 2% of total planned spending for that period.
And despite all the hysteria by Brexiters over the fortune the UK sends to Brussels every year – only to be wasted by their – bureaucrats contributions to the EU are only a modest line item in national budgets. The budgets of most European countries are about 40-50% of the national GDP, whereas the EU's budget is only about 1.5% of its combined GDP. The EU spends less than 4% of total government revenues.
So, what does this "terrifying threat" of withholding the divorce settlement really mean to the national governments of the EU27? They would need, on average, to find the money for a 2% increase to one line comprising less than 4% of their total budgets. Yawn!
All those threats in the media about withholding the divorce settlement aren't scaring the EU; they're being made entirely for consumption by the peanut gallery at home.
So, why should the media report I linked to make Brits feel terrified of a no-deal Brexit?
If things get messy, this is one way the EU will use so that tax payments in the future go to European governments instead of to the UK. These amounts are very significant.
The UK government receives about 75B pounds in tax receipts from the financial services sector. About 20% of that sector is exported to the EU27, producing about 15B pounds in taxes for the UK government. The EU has begun to target those taxes. Unless the UK knuckles under to ITS red lines in negotiations they'll make sure a large slice of those taxes start flowing to European governments.
And ... let's not forget the professional services sector, e.g. accountancy, legal services. That pays almost as much in taxes to the UK government as the financial services sector. The EU will surely target those just as hard.
And ... let's not forget that attempting to withhold the divorce settlement would be utterly futile: they VILL pay! Sooner or later.
If the UK drops out of the EU under WTO rules it will be desperate to reach to new trade deal with the EU - their largest market by far. The first thing the EU will say is "Give us the money you owe us first!" From the EU's perspective, it's not a ransom they extracted in exchange for a cooperative future relationship. To them, it's the UK fulfilling commitments it made and future obligations it had accumulated before seeking to leave the EU.
If the UK is stupid enough to try it, many of their services businesses will have been obliged to establish subsidiaries in the EU by the time any new trade deal is agreed. Most of that business would be lost to the UK forever - even if the new trade deal restores access by British services businesses to the EU.
And another thing … All those claims that the EU will be hurt more than the UK by a no-deal Brexit – because they export more to the UK than they import from it. That's one of those "lies, damn lies, and demagogues' rhetoric" things if ever there was one!
True, the EU exports about 50% more in goods to the UK than it imports from them. The imbalance for services is relatively small. However, the relevant statistics are about 40% of the UK's exports of goods go to the EU27 but only about 15% of theirs go the other way.
Comparing the two is like comparing apples and orangutans. The percentages of at-risk trade are 40% vs 15%, then the UK will lose a greater share of its at-risk trade because the economy of the EU27 is much more diverse.
Where could a business in the EU go instead if it considers switching its current imports from the UK? There are few things it could not get from somewhere else within the EU, and at a comparable price. (The only ones I can think of are whisky and wings for Airbus planes.) They've no reason to consider paying tariffs, filling out customs forms, and less certain delivery times by looking further afield. Most losses by UK's exporters will end up as gains for manufacturers in the EU.
What about British businesses considering a switch of their current imports from the EU? Many products will not be made in the UK. Their choice wouldn't be whether or not to accept tariffs, forms, and uncertain deliveries. It would be whether the EU is still the best choice despite those new disadvantages. For many things they still will be.
I don't think the EU wants a messy divorce. They'd certainly take a hit if it happened, even if much less proportionally than the UK. But, I think they could be confident of being better off with the UK gone after about five years. Compare that to the UK, where Rees-Moggs said – in a rare moment of honesty – "Maybe we'll be better off after about fifty years"!