While Britain is slowly recovering from the Covid crisis, and, I hasten to say, at a slower pace than many of its European neighbours, another crisis already lurks around the corner: Brexit.
Let me be quite clear about this: the British government has never been keen on an extension of the transition period beyond December 2020, but the Corona crisis and ensuing lockdown have meant that negotiations between the UK and the EU have only just recently got under way, making it all but impossible to finalise a deal by the year end. But that suits the British prime minister just fine, since he was elected on a ‘get Brexit done’ platform and clearly sports more optimism than competence in the matter.
Leaving the EU was always going to come at the cost, let alone a Brexit without a deal. Even many Leavers accept now that the claim of saving £350 million per week in contributions to Brussels will benefit the NHS was spurious to say the least. Brexit has already cost the U.K. £130 billion, and a further £70 billion are likely to be added by the end of 2020 according to Bloomberg Economics’ Dan Hanson. That means the British economy is 3% smaller than it might have been if the UK had not voted to leave the EU.
Add to that the cost of the Covid-19 crisis: according to The Guardian, by the end of April the bill for the business bailouts including the furlough scheme amounted already to £100 billion. Since the furlough scheme runs until October- although employers are asked to contribute from August – this tally is bound to increase. And while the economy slowly opens a again, the ultimate impact of the pandemic in terms lost jobs (which will inevitably lead to an increase in Job Seeker’s Allowance and Universal Credit payments) and missed tax revenues due to lower economic activity are nigh to impossible to quantify at this stage. But it is fair to assume that the cost ultimately born by the British taxpayer is going to be considerable. On a positive note, however, with interest rates at an all time low, servicing the debt is not going to be an issue – at least for the next few years.
Certainly not helpful either is the fact that the response to the COVID crisis by the British authorities in general is rather questionable: according to the scientists advising the cabinet half of the deaths recorded since 23 March could have been avoided if only the country had gone into lockdown one week earlier.
So next year the government’s finances are going to be hit by a double whammy: on one hand the costs associated with the COVID-19 pandemic, and on the other hand those linked to Brexit. And when I write cost I don’t only mean expenditure but also lack of income due to business closures and missed export opportunities. But this will suit the Prime Minister and his cabinet just fine: much of the financial hardship that businesses and families will be facing due to Brexit can now conveniently be blamed on the pandemic and get the inept politicians off the hook. And they will take all the credit, again on behalf of Brexit, once the economic recovery on the back of the Covid induced slump gets under way.
For those interested in a dramatised film-version of the build–up to the Brexit vote of June 2016, watch ‘Brexit the uncivil war’ on Netflix with Benedict Cumberbatch in the role of Dominic Cummings. The program may not be available in all countries.
The grumpy older man 