I decided to edit the post to bring it in line with my area of expertise.
The question is, why the UK will be worse off after a no deal Brexit. Why could it not be economically favorable?
The answer is simple: by leaving the EU, the cost of doing business will rise in all cases and lower in none. The default tariffs are higher than existing tariffs. They are a sales tax. The loss of cooperative agreements in service industries is the functional equivalent to tariffs and are probably more damaging.
You may ask, “why could we not just create a new trade deal?” You can, but trade deals are very slow things to construct. It is miraculous that Theresa May’s government had anything at all to show Parliament.
All major global firms run optimization routines, and they will shift those routines by the amount of the new tariffs. It is a mistake to look at the average tariff rates. They do not matter. For some types of goods, the tariffs are not going to matter, but for others, it is likely the entire flow will stop. The UK will have the default tariffs, and everyone trading with the UK will be required to use the generic tariffs. They are item specific. It is incredibly dangerous to speak in terms of average tariffs. That is a meaningless number.
If I wore the average clothing required in most cities in temperate zones around the world, I would freeze to death or die of heat exhaustion in many of them. The issue is variability, not the central tendency. The question is how much of a percentage shift in tariffs will happen minus the effect of added transport costs and the impact of changes in rental spaces for warehousing.
What will happen is that the entire world will be kicked out of equilibrium. The UK will have to compensate for the higher costs by cutting other costs such as wages. In other words, there will be more lower paying jobs to compensate for the added costs created by Brexit. There also could be shifts in interest rates, but it isn't clear without a model as to which way it would go.
For the UK to expand in real terms, rather than nominal terms, it will have to create technologies not present anywhere else. That will require an increase in immigration. All cities of large size require constant immigration. For geographically large countries like the United States and China, much of the immigration comes from within the country. They are also constantly suffering from emigration out as people are constantly moving to new places once they are no longer in the city of best fit. It is why there is so much fight in the heavily populated places in the US against the Trump administration. The lifeblood of all major cities is the constant movement of people in and out to make the city relevant. God save you if you are Detroit USA, and you only have outflows.
The problem is that what most people want are high skilled workers, but that is costly. It costs a lot to hire a general when there are many privates who can eventually be trained to be generals. Plus, high skill immigrants often prefer to live in communities with people of their country of origin. Genius is randomly and uniformly distributed in any population group and is independent of parental income. Also, if you hire someone who has already developed technologies, it is unlikely the marginal gain to the UK will be much as that marginal gain was likely captured by prior employers. For the UK to grow, it is going to need robust immigration at all levels of skill.
For the UK to grow in real terms, it needs to negotiate trade deals after the equilibrium shifts. Imagine, for example, all sheep herding in the UK ends due to tariffs. Imagine it shifts to France, Germany, and Austria. Those three countries will not allow a trade agreement which will take away their newfound income. It isn't possible to enact trade deals until someone sees which industries in the UK go away forever and the low wage workers created from the former high wage workers expand an industry that previously was not that important. It may be that furniture making will increase, though I doubt it.
The UK will need to enculturate innovation. The UK needs to make sure that it is the destination for the new industry, whatever it may be. The UK is likely to have a cadre of highly trained former bankers running around. With a pay cut, all that skill is going to be useful to someone.
In short, Brexit with no deal has no upside for the UK. There will be a handful of individuals who will be better off, some may be much better off, but most will be worse off. The UK has historical competitive advantages, on a comparative basis, in several industries. The changes are going to knock those out, and the UK will need to rebuild.
To use an American analogy, the UK needs to learn to play baseball and give up the advantages of playing basketball. Basketball is a cooperative game. If one viewed the other European countries as members of the team, then in basketball, you gain the strengths of the other members. That is surrendered. Baseball requires everyone to execute their skills with excellence at every point in time. It doesn’t require any cooperation and requires an enormous amount of autonomy.
The UK will need to execute with excellence. It will have to find ways to excel on its own and it will have to find a way to do so without slowing down.