Measures introduced to curb the spread of COVID-19 have enormously damaged the global economy, in particular in Europe, which became one of the epicentres of the outbreak. The Bank of England previously warned that Britain was heading towards its worst recession in 300 years, but estimates show that the UK and Europe may face an even bigger crisis.
A new report conducted by the London School of Economics (LSE) shows that some sectors of the British economy will see business conditions worsen regardless of whether the government is able to strike a trade agreement with the European Union or not, The Guardian reported after reading the LSE’s research, which is due to be published on 29 July.
“Our analysis shows that the sectors that will be affected by Brexit and those that are suffering from the Covid-19 pandemic and lockdown are generally different from each other”, said Swati Dhingra, a co-author of the report and economics professor at the LSE.
The LSE’s report, titled “Covid-19 and Brexit: Real-Time Updates on Business Performance in the United Kingdom”, says that a “simultaneous impact” on the UK business spectrum will be felt in autumn, when the government’s programme aimed at supporting unemployed people ends and the post-Brexit trade environment starts to bite.
Sectors where a close human presence is necessary, such as restaurants, hotels, arts and entertainment, as well as air travel, have been hit the hardest by the coronavirus-induced economic crisis. Those sectors where companies have been able to function with staff working from home have been less affected. Among them are the telecommunications company Vodafone, the accounting organisation KPMG, Google, Rolls Royce, and consumer goods company Unilever. However, the report says that Brexit will introduce new barriers for these companies’ products and services.
The authors of the paper point out that back in 2017, the government said that Brexit would be guided by assessing its impact on all sectors of the UK economy. Authorities have analysed only 10 sectors to date, the report said.
“The government must move beyond its broad assessment of Brexit impacts to much more finely tuned plans”, preparing for the “biggest slowdown of our lifetime”, said co-author of the report Josh de Lyon, a research assistant at the LSE centre.
Swati Dhingra noted that the economic crisis sparked by the coronavirus had “reduced the capacity of the UK economy to take further shocks” and rush “Brexit through”. The authors of the report urge the government of Boris Johnson to implement an industrial strategy that “must reflect” the cold reality of “being in a post-Brexit UK which is placed in a post-Covid world economy”.
In 2016, the United Kingdom voted to leave the European Union. Britain is now in the process of negotiating a post-Brexit trade deal with Brussels, but talks have been stalled and London has passed the deadline for seeking an extension to the transition period, which ends on 31 December. Should the United Kingdom fail to strike a trade deal with the European Union before the end of the year, it will trade with the bloc on the World Trade Organisation’s terms – meaning its products will be subjected to tariffs.