In several occasions, I have been asked to equate Covid’s economic costs with those of Brexit.
There is simply no comparison at one level. Economic activity in Scotland dropped by a fifth, and in record time, at the height of the lockdown. The entire livelihoods of many retail, hospitality and tourism companies were stripped away. And with a partial rebound in recent months, the U.K. figures by the Office for Budget Accountability The economy is still 10% smaller than it was last year at this stage – one of the deepest recessions of any OECD nation.
There have been almost 400,000 layoffs announced across the UK. Alone in the three months to October. Also the most negative estimates of Brexit costs may not come near to these statistics.
It would be foolhardy to say, however, that we have little to fear from Brexit against such a backdrop.
Many businesses remain unprepared for the practical difficulties they will face on 1 January, whether it is the paperwork needed for shipping products overseas, securing necessary product protection permits, or complying with new international travel laws.
When it comes to exporting goods to Northern Ireland, far fewer appear to be aware of the changes – a sector worth over £ 1 billion per year to Scotland. We pointed out in our comment this week that sectors that have been spared Covid’s worst impact, such as manufacturing, food and beverage, agriculture and fishing, are most at risk of Brexit disruption, irrespective of the outcome of negotiations on the future relationship between the United Kingdom and the EU.
However, timing is the main difference between Covid and Brexit. Though Covid’s financial blow was unexpected and profound, for decades, the economic effect of Britain’s long path to Brexit would shape our economy.
The end of the economic crisis is, at least, in sight for Covid. Yeah, in the coming months, there are still big obstacles to tackle, and structural harm is possible. Yet our economy will recover with the right policies and market strategies.
A more subtle yet permanent threat to our future is Brexit. The EU is Scotland’s main foreign trade partner. We trade more with the EU than with the combined markets of North America, South America, Asia, Australasia and the Middle East. Not only does it give us access to new customers to be part of a wider shared market and culture, but all the evidence shows that this would lead to changes in innovation, competitiveness and growth – places where the Scottish economy needs all the support it can get.
It is not without any irony that one of the key reasons for Brexit was supposedly the freedom of corporations from red tape. Hundreds of thousands of businesses now have to re-plan their expenditure plans to satisfy the immense logistical requirements they are now putting on them only to continue appealing to customers that they have been tapping into for years.
Some would tell you, of course, that the UK is at the cusp of a glittering array of new possibilities. These are probably the same individuals who told you that it is easy to negotiate trade agreements. Although new possibilities will arise, it is probable that the cost of unlocking them will far outweigh the cost of closing the door to existing partnerships.
In case there was some doubt, recent weeks have shown that Brexit was not about making the UK economically stronger. There was no effective strategy to handle the transition, either. Unfortunately, as a consequence of Brexit, it is those far from the halls of power who would be worse off long after the Covid crisis has faded from view.
Graeme Roy is director of the University of Strathclyde’s Fraser of Allander Institute.