Coronavirus and Brexit: a fatal cocktail for the British economy?

Audio 03:48

By: Dominique Baillard Follow

Brexit negotiations are now deadlocked. The prospect of leaving the United Kingdom without an agreement fears the worst for the British economy already shattered by the Covid-19.

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According to the OECD, the United Kingdom will be the country most weakened by the pandemic with a fall in its GDP of 11.5% for this year. It could endure the worst recession in three centuries. In April the GDP fell by 20%, which means that the level of wealth fell back to its level of ... 2002! As everywhere in the world, the coronavirus mainly strikes the poorest communities. This results in the United Kingdom in a much higher health and economic price in the northern regions of England, those which are most favorable to Brexit. The former Labor strongholds that gave their voices to Boris Johnson record the greatest number of victims of the Covid and take the brunt of the economic impact of the crisis. The economic impact is twice as violent in this part of the country as in the London region, acquired in Europe.

Can Boris Johnson help these underprivileged regions as he committed himself to the day after his victory in the elections ?

In the event of a hard Brexit, the exercise seems highly improbable. Because public finances are already greatly degraded by stimulus spending linked to the pandemic; the Covid has increased regional disparities within the kingdom and Brexit will worsen them even more because it is in these poorest industrial regions that jobs are most threatened, in the automobile, aeronautics or tourism, if no agreement is found between London and Brussels. Only a vast infrastructure investment program could redress these inequalities and strengthen these regions. Finance minister Rishi Shunak planned this, but today has an even more urgent priority: to prepare a budget to revive the economy of his country.

A prospect that seems distant, according to the E and Y Institute, the rebound will not take place before 2023

The institute of former Labor Prime Minister Tony Blair is even more pessimistic: according to its experts, Great Britain risks never recovering from the current damage. The contraction of the economy will automatically compress tax revenues and therefore lower its ability to overcome the crisis. When Brexit takes effect on January 31, with or without an agreement, the country will still be struggling with the economic crisis caused by the pandemic. The difficulties are likely to worsen when the government-sponsored partial unemployment program is completed, that is, from October. It will be the moment of truth for companies, which by losing the safety net, may be forced to file for bankruptcy. Too worried about their survival, companies do not materially have the means to prepare for Brexit without an agreement. In this case, they will be exposed to a new calamity: high customs duties in trade with the continent, destroying their competitiveness. The government is well aware of this lack of preparation, it will launch a massive shock communication campaign, in the hope of waking up businesses and mobilizing them urgently so that they are ready for brexit.

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• Economy
• Coronavirus
• Brexit
• United Kingdom