Britain faces double hit: Covid19 and no-deal Brexit

November 30, 2020 08:15
Photo: Reuters

Many Hong Kong people are considering emigration to the United Kingdom which is offering entry to those carry British National Overseas (BNO) passports and their families. What kind of country will they arrive in?

Last week Chancellor of the Exchequer Rishi Sunak laid out the dismal statistics that have resulted from the coronavirus pandemic and the government’s inability to contain it.

This year the economy will contract by 11.3 per cent, the largest fall for 300 years, and government borrowing will reach 394 billion pounds, the biggest since World War Two. By the second quarter of 2021, 2.6 million people, or 7.5 per cent, could be out of work, he said.

“Public finances are not sustainable and we will have to take tough decisions. This situation is clearly unsustainable over the medium term,” he said. This means tax increases and lower spending, even on projects the Conservative Party promised in its election manifesto last year.

Britain has more than 58,000 deaths from coronavirus, the highest in Europe, and 1.61 million cases. It has been unable to control the virus because government measures have been ineffective and many people ignore official guidelines in going out and meeting others.

So the only hope to end the pandemic is mass vaccination. The UK government has pre-ordered 100 million doses of a vaccine made by AstraZeneca developed by Oxford University. Its researchers say that it offers protection of between 70 and 90 per cent and is cheaper and easier to store than vaccines made by Pfizer and Moderna.

On November 23, Prime Minister Boris Johnson said the majority of people most in need might be able to be vaccinated by Easter next year.

So the Hong Kong migrants arriving in 2021 would face an economy that will be contracting, with unemployment increasing, hospitals overcrowded and public services worsening because of lack of money.

Then there is another black cloud hanging over the economy. Britain left the European Union in January, with a one-year transition period that ends on December 31 with the aim of concluding a trade agreement.

With just four weeks left, the two sides have not reached a deal. On November 26, Michel Barnier, the chief EU negotiator, told EU ambassadors: “the conditions for an agreement are not there.” The three main sticking points are the access of EU fishermen to British waters, the “level playing field” guarantees for businesses and how to enforce any deal. So a “no-deal” exit is increasingly likely. Both sides are making contingency plans for such an outcome.

Britain’s independent Office for Budget Responsibility (OBR) said a no-deal Brexit would cut almost two per cent off GDP and increase unemployment by 300,000.

“The economic hit (of Brexit) is more than the OBR’s estimate of the long-term damage caused by Covid-19”, wrote David Gauke, former Lord Chancellor, in the Financial Times last weekend (November 28). “To get any kind of deal, Mr Johnson will have to accept that, if the UK departs from certain standards in social, environmental and state aid policy, access to EU markets will be reduced.”

For months, the business community has been pressing the government to reach a deal, to enable them to plan the future and their relations with their biggest customer.

In an editorial on October 19, the Financial Times said: “Mr Johnson struggles to explain why the arcana of state aid rules or the need to safeguard fisheries -- 0.1 per cent of the economy -- are sufficient to trigger a rift that would slap hefty EU tariffs on businesses from carmakers to livestock farmers. Failure (to reach a deal) would be even more of a travesty since the bulk of an accord has already been agreed.”

All this is bad news for the Hong Kong arrivals. It means that economic growth will slow and fewer jobs will be available. If they set up a company in Britain that does business with clients in the European Union, the terms of trade will be less favourable than now. If they plan to work in the public sector, there will be fewer funds available for it.

Most fortunate are those who are highly qualified, like doctors, nurses or in specialist areas of finance, and can find a desirable job in the UK. But most must prepare to have their own sources of income for the first few years, to buy a property and support their families.

They must hope that, by 2022, the Covid19 nightmare will be in the past and the UK has worked out smooth trading relations with the EU.
The future is full of uncertainty.

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A Hong Kong-based writer, teacher and speaker.

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