09 Sep 2020
It’s certainly no secret that 2020 has been an extraordinarily difficult year, not only for individuals coping with Covid and its economic fallout, but also for Governments around the world trying to balance both their healthcare and economic priorities. And they have managed this in varying degrees – with every country facing its own unique set of challenges.
In the US, Trump has been trying to handle the crisis while also contending with a struggling election campaign. In the UK, there’s another major factor to deal with, and that is of course Brexit. It might have slipped under the radar slightly, but the UK is still currently within the transition period, however the UK and the EU haven’t exactly seen eye-to-eye so far - meaning there’s a real threat that the UK may end up leaving the EU without a deal in place and no official relationship with their closest neighbor. When you pile this on top of the economic struggles and Covid chaos, it’s easy to see why there are concerns.
In a document leaked by The Sun newspaper over the weekend, we see that the UK Government have their concerns along with the Cabinets emergency plans for a “Perfect Storm” scenario plan lumping Brexit along with a Covid second wave.
As businesses and schools re-open, and we say goodbye to summer, a second spike in cases is a possibility. And the economy ultimately plays into this.
While the government has been working to shield the economy and jobs from the impacts of the pandemic, it hasn’t been completely successful. The Government can pay for furloughed workers in the short term, but it will be difficult to maintain long term – which is why it is set to expire in October. If the Government can’t or won’t continue to pay furloughed workers until a full economic recovery, a large number of businesses will have to let a large chunk of their staff go when they return to the company’s pay roll.
It’s not just a ‘jobs problem’ either, with the economy shrinking significantly and GDP dropping by 21% in the second quarter of this year – it’s the highest of any G7 country. Obviously, all of these issues are exacerbated if a second wave hits during the winter months. And what if the second wave hits at the same time as the Brexit deadline? It matters not which side of the Brexit debate you are on, or what your opinions on it are – a no-deal Brexit represents a disruptive challenge coupled with an economic shock. Overnight, the UK and the EU would go from being part of the same block to having no trading relationship or agreement. Both sides could start using WTO rules, but it would still take a considerable amount of time to transition into.
But this is all speculation… isn’t it?
After all, a deal might be reached, a second wave may prove to be non-existent, and the economy could begin to show recovery. Therefore, it is reasonable that the UK Government ought to be preparing for this eventuality. Referencing The Sun’s article – it turns out that’s exactly what they have been doing. The plan runs through the worst-case scenario and the Governments plan to cope with it, comprising of the convergence of a no deal, a second wave, and the economic issues due to the previous two. Mandatory controls on UK goods is likely to be enforced on day one, causing major problems and the entire single market model relies on equitable trade and common laws. Something which wouldn’t be guaranteed if the UK no longer follows EU rules.
With 51% of the UK’s imports coming from the EU, 30% of that is food items, meaning food shortages look to be a real and present problem on the horizon. Petrol, medicine, and chemicals used in water purification, make up a large portion of the remainder.
The problem is even greater for Brit’s living in the Channel Islands or Gibraltar as they are even more reliant on trade with the neighboring EU. Both are geographically closer to France and Spain respectively than they are to the rest of the UK. As such, it’s been suggested that supplies may even end up being airlifted into these regions, and huge issues in farming and livestock will also play a pivotal role in the tentative months ahead.
The UK Government is set to spend 775 million pounds on border infrastructure in an attempt to limit these issues and prevent what could be a major strain on supply chains. They are also ‘supposedly’ set to spend millions on an advertisement campaign aimed at businesses, encouraging them to stockpile essential goods and prepare their supply chains for these imminent changes.
Despite these concerns, it seems the UK Government has no intention of slowing down Brexit to cope with current times. So, is this ‘worst case scenario’ worth taking seriously? Do you believe the UK government is adequately prepared to handle such a monumental eventuality given their handling of the current Covid crisis? Well… Michael Gove, chancellor of the duchy of Lancaster thinks so. In fact, he seemed fairly unfazed by the prospect of a ‘no-deal’ by saying –
“We are working flat out to make sure the UK is ready for the changes and huge opportunities at the end of the year when we regain our political and economical independence for the first time in almost 50 years. A brighter future awaits, as we forge our own path”