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World news - 30/04/2020

COVID-19 lockdown: Will Brexit end without a trade deal?

Author: George Mangion
Published on Malta BusinessToday 30 April 2020

Will Brexit end without a trade dealWithout wanting to sound biased in favour of the EU, one must admit that London’s role as a world finance leader could also be in jeopardy. We hail the recovery of UK prime minister Boris Johnson, who was recently released from hospital after a three-week convalescing period following his Coronavirus infection. He proudly resumed meetings with top ministers and advisers at 10 Downing Street while thousands of UK citizens were facing the brunt of being locked down during the past eight weeks of the pandemic.

The UK’s economy was badly hit by the lockdown and its health authorities are battling the consequences of infections, amid even stricter orders for citizens to maintain social distancing. Measures were taken not only to protect the health of the most vulnerable communities, but also their quality of life more broadly – including their financial security, mental health, access to resources, and social relationships. Even so, the economic and social disruption is clearly visible.

The streets of London, so ever fully populated by Londoners and tourists alike – are now bare and gloomy. Elderly citizens and other vulnerable persons are cocooned at home with only limited scope for venturing out except for buying essential goods or visits to doctors. All airports are closed except for airlines delivering essential cargo and many fear the slowdown will proceed to become a full-blown recession unless a vaccine is quickly developed. Scientists, all predict that a fully tested vaccine that can be produced by the millions and distributed globally will take another year to surface.

This unexpected calamity has exasperated the country with a double whammy of a recession combined with the possibility of a no-deal Brexit. Brexit will undoubtedly bring long-term systemic changes to the UK economy, politics and society, and there continues to be uncertainty about how leaving the EU might affect the lives of the UK’s inhabitants. Ideally, a full equalities impact assessment is conducted examining the potential legal and socioeconomic effects of Brexit on different groups of people.

The concern seems to be that the economic costs of abruptly withdrawing from the European Union without a trade deal might be buried by Boris Johnson beneath the damage wreaked by the coronavirus. Can this strategy be resisted and normality maintained since it goes without saying that vulnerable groups will be affected?  Undoubtedly, there will be unintended consequences. The poisoned cocktail of Brexit and the coronavirus in the UK will probably affect badly the lower working classes and the disadvantaged, albeit to a different extent. Indeed, Brexit without a trade deal is likely to exacerbate some of the deleterious effects of the virus. It can be argued that leaving the EU without a deal will make it more difficult to fight the aftermath of a pandemic.

The UK left the European Union on 31 January 2020. However, after three and a half years of debate since the 2016 referendum, there remains a lack of clarity about the UK’s future relationship with the EU. Some observers predict that at the end of negotiations it will obtain a Canada-style FTA, plus side deals on fisheries, data, judicial cooperation, transport, and energy. Back to the virus syndrome, it is noted that the UK will not seek to maintain membership of the European Centre for Disease Prevention and Control (ECDP), which oversees the surveillance of communicable diseases, including coronaviruses. Also departed is the European Medical Agency being relocated to Europe.

It boasts a centralised procedure for licensing new drugs; or the EU Clinical Trials Register which is another casualty under Brexit. The UK left the EU at the end of January and is now excluded from EU decision-making – and any collective support packages, for instance, the EU’s Coronavirus Response Investment Initiative – on the pandemic. The British government has stated that it does not plan to take the option to extend the transition period by up to two years. To keep to its promise, the government announced that negotiations on the future UK-EU relationship will continue, but they would be conducted online due to the coronavirus.

One cannot but lament the loss of some EU nationals working in the health and social care sector since Brexit, at a time when they are most needed. Readers may ask – why is there so much fuss about the UK leaving without a deal? For a start, the consequences of an economic divorce will most probably leave some disadvantaged people with less financial and social resilience, therefore, more vulnerable to both Brexit and the coronavirus.

Time will tell if the Chancellor’s financial package to fight the outbreak will be sufficient to meet people’s care needs. Last week, the European Union’s chief negotiator, Michel Barnier, said progress in four areas of discussion had been “disappointing”, while a British statement said, “limited progress was made in bridging the gaps between us and the E.U”. One can never be fooled that having eight months till the end of the year is sufficient time to reach a trade deal on complex issues that took over 40 years in the making.  To be realistic, it is pushing it when Boris Johnson reiterates that there will be no extension beyond the end of the year.

There are complex matters to be negotiated starting on the critical issues of aviation to fisheries, new customs posts at the border, and a new immigration system. Little can be more vexatious than agreeing on how best to set up new border checks for both exports and imports. This could result in higher prices, border backlogs and delays, and even shortages of staples, such as food and medicine. When the prospect of a no-deal arose last year, some British companies and citizens began stockpiling goods. Thankfully, one major hurdle was solved that in case of a no-deal this will not lead to a so-called hard border between Northern Ireland and the Republic of Ireland, but rather to customs checks on goods traversing the Irish Sea.

Last year, saw several international firms shifted their investments from the UK to elsewhere in the EU. Aerospace giant Airbus is a prominent example, pointing towards a policy of directing funds and jobs away from the UK if there is no trade deal. Such moves could put tens of thousands of British jobs at risk. Without wanting to sound biased in favour of the EU, one must admit that London’s role as a world finance leader could also be in jeopardy. Previously, as a full EU member, the UK’s financial services provided 11 percent of tax revenue; 44 percent of exports go to the EU.

If the majority of economic forecasts are correct and the UK’s economy suffers post-a no-deal Brexit, the negative effect will have an impact on all those groups represented in the low-income bracket (i.e. ethnic minorities, the disabled, refugees and asylum seekers, people who are precarious workers) who rely more on public services and benefits and have less disposable income and spending power. For those living in poverty or homeless, or suffering job losses, these impacts will also be deeply felt.

One augurs that Boris Johnson takes the bull by the horns and prioritizes the immediate damages inflicted by the pandemic and in a pragmatic manner seeks an extension so as to be adequately poised to resolve the tangled web of Brexit.

George Mangion

 

Author: George Mangion
Published on Malta BusinessToday 30 April 2020
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