Revealed: Government has failed to plan for economic ‘double whammy’ of Brexit and Covid

Ministers have 'little justification' for their Brexit trade plans amid the coronavirus crash, according to a new report from the LSE.

Business sectors that have already been pummeled by Covid-19 face a major hit from Britain’s looming EU divorce, according to a new report from the London School of Economics.

The paper warns Brexit will deliver a twin blow to the economy whether the Government agrees a trade deal with the EU or not – and that Brexit and Covid will together hit a huge range of sectors in complex ways.

The chemicals sector, which saw a 70% drop in business volume between April and June during lockdown, will take a 15% hit from Brexit next year after the transition period ends. The real estate sector, down 62% during lockdown, will take another Brexit hit of nearly 3%. The post and telecoms sector also saw a Covid collapse of 77% – and will be landed with a Brexit drop in trade of 4%. ‘Water transport’ and ‘basic metals’ will see a Brexit boost though, so that’s all good.

The academics note that the Government has not updated its post-Brexit tariff plans to consider the impact of coronavirus.

The authors write: “As early as 2017, the government had announced that Brexit negotiations would be guided by granular impact assessments across sectors. Sound impact assessments are crucial for good policy design and this is what the government had rightly put forward. Yet the most detailed quantitative impact analysis available from the Government to date gives details for just 10 broad sector categories.

“This makes the evidence too scant to adequately guide policymaking and it is unsurprising that the new policies that the government has announced in its Brexit plans, such as the tariff schedule published recently, have little justification on why certain policy objectives have been chosen.”

They add: “There are huge differences in the ability of workers to work from home across sectors. Our data suggests that just 8 per cent of workers in the Accommodation and Food sector are able to work from home, while over 80 per cent of workers can perform their jobs remotely in the Information and Communication sector. The data suggests that other sectors, such as parts of manufacturing, have needed to increase output meet urgent needs arising from the pandemic. But even these sectors face huge risks, with the value of world trade collapsing.”

Campaign group Best for Britain said the report reflects their own findings showing that a ‘double-whammy winter’ looming for UK businesses, particularly in areas such as the Midlands and North West England, where the major business sectors are particularly exposed.

CEO Naomi Smith said: “The needless piling of pain upon pain for struggling businesses will cost jobs and hurt the economy, at a time when our country’s finances desperately need to be shored up. The Government must heed these warnings, and grab the opportunity to draw up much more detailed plans for businesses, sector-by-sector, before time runs out.

“As the LSE report makes clear, a rushed “one-size-fits-all” solution simply increases the likelihood of the country being levelled down not up, and is not what voters were promised by the Conservatives at the last election.”

Acting Leader of the Liberal Democrats, Ed Davey MP, said Boris Johnson has been pledging ‘jobs, jobs, jobs’ but is delivering ‘P45, P45, P45’:

“As Britain’s economy enters the deepest recession for 300 years due to Covid, the Conservatives could have justifiably chosen to delay Brexit to prevent even more job losses and a double whammy for our economy. 

“But Boris Johnson is recklessly choosing to ignore the economic warnings, putting his own short term political interests before the people of Britain.”

Josiah Mortimer is co-editor of Left Foot Forward.

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