Where the covid-Brexit double whammy will hit hardest – new report

Analysis from progressive charitable alliance forecasts tougher times for UK workers for the next four or five years - particularly in the regions.

Coronavirus image

Full economic recovery from the global coronavirus outbreak, loading on top of Brexit, is expected to take four or five years, with parts of regional UK set to suffer most.

That’s according to a report by Social Market Foundation (SMF) chief economist Kathryn Petrie and researcher Amy Norman, sponsored by cross-party group Best for Britain, released over the weekend.

James Kirkup, director of the SMF, wrote the foreword to the report, which specifically examines the impacts of covid and Brexit together.

“The evidence shows that both ending our close trading relationship with the EU and the measures taken to combat the coronavirus will have negative impacts on the UK economy as a whole.

“In some cases and some places, that double impact will be severe. At base, this report demonstrates the simple fact that leaving a developed free-trade agreement with our nearest and largest trading partners at the same time as facing a pandemic will expose many local areas of the UK to a painful double economic impact,” he said.

Many if not most local areas across the UK could suffer some sort of double hit from Brexit and coronavirus, the report suggests.

However, more than one in three (35%) local areas in Scotland were placed in Category 4 or 5 for their exposure to a double economic hit, based on the gross value-added of sectors locally.

The City of Edinburgh would be the most severely affected local area if the UK leaves without a deal at the end of the year, with almost 70,000 jobs in the sectors most exposed by the double economic blow of Brexit and coronavirus.

In addition, while London and the South of England would be highly exposed to the double economic hit caused by Brexit and coronavirus under a proposed free trade agreement with the EU, leaving the EU without a deal in place would create pockets of severe disruption across the country, particularly in the North West and Midlands regions.

As a result, 50% of local areas in the North-West were placed in Category 5 (the highest category) and a further 40% in Category 4 for their exposure to a double economic hit based on the gross value-added of sectors locally.

Naomi Smith, CEO of Best for Britain, said the report “definitively rebuts” any speculation that the impact of leaving the transition period could be masked by the coronavirus recession.

“The data is clear: when you scratch beneath the surface, so many key sectors and local areas will be exposed to a dangerous double whammy of economic hits,” she said.

“With public debt spiralling, the government is boxing itself into a fiscal corner unless it extends the transition period and secures a trade deal at the end of the ongoing negotiations.”

Petrie and Norman write that even the Tory government’s proposed ‘free trade agreement’ Brexit deal will have a medium-size negative impact on GDP. Leaving without a deal in place (on WTO terms) is expected to have a large negative impact on GDP. That’s before the impact from coronavirus is taken into account.

The third chapter of the report focuses on the economic impact of coronavirus on different sectors of the UK economy and on the regions and local areas of the UK.

“Over the next three years a range of sectors will be negatively impacted by the coronavirus crisis and subsequent recession. In broad industry terms, ‘finance, banking and insurance etc’ and ‘construction’ are likely to be severely impacted,” write Petrie and Norman.

The finance, banking and insurance category comprises 33% – a third – of UK GVA.

But other industries will also suffer. Manufacturing accounts for 10% of UK gross value added (GVA) faces a medium negative impact from coronavirus, the analysis finds.

In addition, London is likely to face the biggest coronavirus-induced underperformance as the majority (86% or £192.8 billion) of its total GVA is from sectors facing medium or highly-negative impacts.

Comparable data were not available on Northern Ireland, according to the report authors.

The report has been released just ahead of the final round of UK-EU negotiations and before UK and EU leaders meet to discuss progress, with a view to informing the debate.

Fleur Doidge is a freelance journalist for Left Foot Forward. Follow her on Twitter.

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