As Brexit brings economic costs, be grateful for grace.


Through Jeremy Peat

I grew up in the shadow of the Second World War when I was born in March 1945, and I was all too aware, even as a child, of the ongoing conflicts within Europe and the threats they posed to peace and stability on this continent and indeed around the world.

I have never been able to fully understand the anti-European sentiment that flourishes in Britain – particularly, though not exclusively, in England.

It appears to emanate both from the right and left wings of politics, and for decades it has cast its unwanted shadow over the delayed attempts of Britain to join the EEC’s great European adventure, which gave birth to the EU and then the euro.

A very unwelcome shock was the “victory” of the “Leave” campaign in the referendum, and I will never forget the degree to which this was built on lies and fabrications and who was responsible for promulgating them.

We’re gone now and we have to look forward rather than back. There is no question that leaving would come at an essential economic expense, even with this agreement. On the positive hand, though, it is not a “no deal”; there will be no tariffs or limits on commodities – but we do not know the status of our major services industries, and because of much greater bureaucracy, goods cross our borders in both ways, there will be substantial costs.

So on the Brexit front, we are facing a problematic situation, but by no way the worst-case scenario that has remained a possibility until Christmas Eve.

We should not thank the Prime Minister for the compromise he made, but we should only be grateful that at least a continuity of free trade in goods has been reached even under his tumultuous “leadership”.

But now we have three key positives to provide us with a moderate degree of hope to look forward to 2021.

First, in a couple of days, Donald Trump will step down and the world should look forward to a much less malevolent White House presence. This must be good news for the global economic outlook, which by the end of this decade would rely too much on the link between the existing economic powerhouse (the U.S.) and its chosen successor (China).

Second, the devastating effects of a no-deal Brexit have been avoided and we now have to make the most of what we have.

And third, in order to protect us from Covid, we have two licensed vaccines, including – it seems – the rapidly spreading new version.

Covid’s social and clinical effect will be with us well into 2021. When spring begins, we can only hope that life will return to some degree of normalcy.

Unfortunately, the economic effects of this pandemic will last even longer, even if the epidemic itself is in retreat as spring turns to summer (which is a major “if,” my medical friends inform me).

For many, the first months of the new year will be troublesome as unemployment continues to increase and many companies find it difficult to cope with another all-out shutdown period.

Once more, several corporations and individuals – from Whitehall and/or Holyrood – would have to rely on government funding.

The time for governments to rein in their very important generosity of funding must not be now.

The emphasis must be on maintaining the tight lockdown steps while speeding up the implementation of the vaccine and retaining the government’s courage and help until the economy is ready to reopen. It would be a catastrophe to open too early; withdrawing funding too soon would be a disaster.

The British Chancellor of the Exchequer and his colleagues in other economies would find this difficult.

The size of the difference is staggering between government revenues and expenses. In peacetime, the amount of government debt exceeds anything ever seen.

Yet the term ‘austerity’ must not be permitted to return to our economic lexicon. George Osborne’s specter is as much to be feared as Jacob Marley’s specter was in Dickens’ time!

Even after the end of the pandemic, the economic effect will be with us. In the simplest case, even though we are efficient with economic management, GDP will not return to its pre-pandemic peak for a couple of years.

Our economic output and therefore household stability – even with a favorable wind – will take a decade or more to face Covid and Brexit.


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