How Has COVID-19 Impacted Brexit?

In a parallel world in which COVID-19 had not happened, it is likely Brexit would dominate the general conversation and the media headlines. As we entered 2020, it was clear that there was limited time available to come to an agreement on trade with the EU, but as of August 2020, there is little sign of progress. It is highly likely that COVID-19 will have impacted on the Brexit outcome, due in large part to Whitehall’s shift in focus away from our departure from the EU to handling the pandemic. In this article, we will discuss the ways in which COVID-19 may shape the outcome of the UK’s departure from the EU at the end of the current year-long transition period.

A More Comprehensive Trade Deal Is Now Less Likely

It is a cold hard reality that COVID-19 has eaten into the time needed to negotiate a trade deal. If it was implausible in the one-year timeframe we had, it certainly is now. Not only has the pandemic compressed the time and resources available, but it has also made it harder for negotiators to get around a table to find agreement. Much of the discussion has been in the form of online meetings and Zoom calls.

According to Bruegel, a European economic think-tank based in Brussels, the future arrangement will arrive in stages and that we are “on course for either a last-minute extension, a fig leaf of a deal that leaves most of the details to be worked out later or some combination of the two.”

This makes sense. Rather than no deal, it is possible that the negotiations will simply continue with basic cooperation happening in the meantime, on areas such as border control and customs.

COVID-19 Will Add to Immigration Problems Post-Brexit

Any UK business currently reliant on the free movement of labour from the EU will have already been concerned about the impact of Brexit on their operations. Add to this COVID-19, and those businesses will now be most likely putting in place risk management plans to deal with the potential shortfall in staff. Transport links between countries have become paralysed due to lockdown restrictions, meaning that even if it is possible from an immigration standpoint for staff to come from EU and non-EU countries from January 2021, they may not be allowed to travel due to new lockdowns as the virus re-emerges.

The EU Is Less Able to Focus on Brexit

Belgium is currently in the midst of an increase in COVID-19 cases, as are many other European countries. Brussels is now one of the worst affected cities in Europe, which will add pressure to the inner workings of the European Commission. As a result of the need to focus on their own response to the virus, the EU is likely less able to focus on Brexit, in terms of negotiation and preparation.

COVID-19 is also causing division in the EU. As the authors of the Bruegel article explain “the pandemic is exacerbating differences within the region. Fiscally well-off countries such as Germany have been able to flood their economies with aid and development funds, while countries such as Italy that were already taxed financially are struggling to pay for necessary economic rebuilding.” They go on to say, “both the UK and the EU-27 will need to prioritise putting their own economies back on track. As demoralising as it might be to extend the process further, rushing is unlikely to bring the kind of outcome anyone wants”.

Putting it mildly, if there was ever a time to work out a complex and comprehensive trade deal with the UK, this surely is not it. And unfortunately, any lack of preparation for January 2021, where it is needed, will impact on trade in the EU and UK.

Our Economy Is Already Haemorrhaging Jobs

One of the most obvious areas of impact of COVID-19 on Brexit is the health of the UK economy leading into 2021. To truly understand the likely impact, it is important to look at individual sectors. Analysis by Vox EU which provides research-based policy analysis and commentary from leading economists, based on data from the Confederation of British Industry (CBI), concludes that by analysing real-time business survey data, it is possible to see that the sectoral damage caused by COVID-19 and Brexit are very different. They also believe that industries which may have escaped COVID-19 may be exposed by Brexit; “Sectors that have suffered less during the lockdown are the ones that are exposed to bigger negative impacts from Brexit, as measured by actual effects since the Brexit vote and predicted effects from higher trade barriers with the EU.”

They go on to explain, “Tariff and non-tariff barriers that may arise in sectors like automotive, food and professional and financial services could significantly affect the structure and size of the UK economy in the long run, as well as create costly short-term adjustments.” On this basis, they conclude that the UK government needs to take a more nuanced sector by sector approach to ensure that decisions that are made regarding Brexit “account for the differences in market conditions and constraints faced by UK businesses in the biggest slowdown of our lifetime”.

Wrapping up

There are likely many other impacts of COVID-19 on the outcome of Brexit, which will come to light as the dust starts to settle. And this poses another question; what is the impact of Brexit on COVID-19? Would we have had greater cooperation on a vaccine if were still entrenched in the EU? How much would we have benefitted from the pan-European €750bn pandemic recovery fund? And would we have had more PPE when we needed it? One can only imagine the benefits of the UK’s full cooperation with the EU, but we will never know now. At times like this, we need to pull together and remind ourselves that viruses don’t respect borders, and as human beings, we are all vulnerable.