COVID-19 & BREXIT – A DOUBLE WHAMMY
It has been said that misery loves company. The misery of the coronavirus pandemic will love the company of a no deal Brexit, if Britain falls off the cliff on 31st December. During months of lockdown, the focus of the UK government has, understandably, been on fighting the disease. Boris Johnson himself almost succumbed to Covid-19 and was incommunicado for weeks. Michel Barnier and David Frost, the EU and UK chief Brexit negotiators, both tested positive for the virus and had to go into self-isolation for long periods. So, the fragile Brexit negotiations have necessarily been on the back burner in London and Brussels. The original Brexit timetable required an agreement by the end of June on whether or not an EU-UK trade pact can be finalised this year. You would be hard put to find a single politician in any of the EU’s twenty-seven Member States who agrees that timeline is feasible.
Despite overwhelming EU pessimism on the timing of negotiations, the UK government seems determined to charge ahead. The prevailing view from ministers like Dominic Raab, Michael Gove and Matt Hancock appears to be ‘We’ve got the basis of the agreement already in place, so there’s no reason to delay. Let’s just get on with it.’ Rejecting opposition calls for an extension to the Brexit transition period, Northern Ireland Secretary of State Brandon Lewis told MPs “The best way we can give certainty and confirmation for business is to follow through and deliver on our promise to make sure we leave (the EU) and have everything in place for the end of December this year.” But that laissez faireattitude has been slammed by the EU’s trade commissioner Phil Hogan, who accused the UK of showing “no real sign” of approaching Brexit trade talks with any sort of coherent plan during the coronavirus crisis and suggested that Britain may be aiming to blame Covid-19 for “the fallout from Brexit”, when they refuse to extend talks into 2021.
EU-UK trade negotiations are not the only issue facing a 31st December deadline. The fraught deal over the Irish border, signed off in the Withdrawal Agreement in January, must be implemented by law on New Year’s Day 2021, whether or not a new trade deal has been agreed. The UK Cabinet Office has said that they believe 50,000 additional customs officers will have to be hired and trained to deal with the new customs arrangements, but so far there has been little sign of progress in this respect. Indeed, Michel Barnier has criticised Britain’s on-going “bullish and confident” stance, while no apparent preparations have been made, although Boris Johnson has now admitted that checks will be required on goods crossing the Irish Sea, despite having promised that this would never happen.
The last thing the Prime Minister wants right now is another row over Northern Ireland and its status as a member of the UK. If Britain crashes out of the EU with no deal at the end of this year, we will revert to World Trade Organisation terms, which would mean tariffs for businesses and farmers in the province, as well as the rest of the UK. That would be a disaster for the government, particularly when Northern Ireland, Scotland and London, voted by a majority to remain in the EU in the 2016 referendum.
With the outlook for the British economy at rock bottom, the prospects for the UK suffering a double whammy from economic recession caused by the coronavirus and a no-deal Brexit, are looming large. The mountains of money thrown at the Covid-19 crisis will impact on Britain’s economic position for generations to come. Economists are now predicting a recession to end all recessions. Much of the economy has been closed down for many months and the Treasury has doled out an estimated £500 billion in furlough payments and other emergency measures. UK debt has rocketed. Even when the virus is tamed or defeated, there will be tens of thousands of businesses that never re-open and many millions of unemployed. The cost to the taxpayer of mushrooming universal credit payments will be gigantic and collapsing businesses will further reduce consumer supply, creating a downward spiral of economic contagion.
Throwing a cliff-edge Brexit into the mix will be catastrophic. The very thought of a disorderly Brexit will dent market confidence at precisely the moment we need the markets to rebound. Market stability is vital, as most British citizens are investors through their pensions. The poor, the elderly and disabled will be most at risk and leaving the EU with no deal will simply add to the country’s economic and social woes. A decision on whether or not to seek an extension to the Brexit transition period must be made by 1st July. It would surely be prudent and entirely understandable given the Covid-19 pandemic, to ask for a six-month extension, even if that extension was ultimately found not to be needed?
Boris Johnson must take account of the fact that the EU has suffered too. Like us, it faces soaring debts and unemployment when the lockdown is finally eased. Ursula Von der Leyen, the President of the European Commission, has outlined plans for a “Recovery Instrument’ based on short-term borrowing on capital markets. “Our investment in rebuilding comes at a price - rising debt,” she says. A cliff-edge Brexit would simply add to the EU’s debt problems and would give rise to difficulties in our future relations with our biggest trading partner, at a time when we will urgently need to re-boot that trade.
Even if we reach an agreed trade deal with the EU, its impacts will be widespread, damaging and pervasive. The government therefore has a duty to ask for an extension so negotiators have enough time to reach a deal that minimises such outcomes. We cannot afford to risk a second economic slump caused by a loss of EU trade, due to a no-deal Brexit, right on top of the deepest recession we have ever experienced. We have all come through an international emergency and even the gloomiest forecasters know that economic recovery will eventually follow the decline. We must do nothing to jeopardise that recovery or add to the current misery. Grant an extension to the Brexit deadline, Boris. You know it makes sense.