No-deal Brexit would hit economy harder than Covid, OBR warns
Watchdog predicts that failure to reach trade agreement will damage sectors which are surviving pandemic
A no-deal Brexit would strike a devastating blow to parts of the UK economy spared the worst of the coronavirus crisis and result in hundreds of thousands of job losses, the Office for Budget Responsibility (OBR) has predicted.
The economy is already expected to contract by a total of 11.3% this year - the “largest fall in 300 years”, says Politico’s Ian Dunt. But a failure to reach a post-Brexit trade agreement with the EU could reduce GDP by a further 2% next year on top of the financial damage wrought by the pandemic, according to a newly published OBR report.
And that drop comes in addition to a 4% fall in GDP that the spending watchdog predicts will result from Britain quitting the EU even if a deal is secured.
If last-ditch Brexit negotiations fail to bear fruit, the tariffs and barriers that will follow are expected to “disproportionately affect sectors that otherwise would have come through the pandemic reasonably unscathed”, says The Times.
Four sectors that were “spared a big Covid-19 hit” - agriculture, finance, real estate and mining - are expected to be “hurt most”, adds the Financial Times.
The OBR forecasts that the combined effects of no-deal will result in more than 300,000 job losses by November next year, in addition to the nearly million more people who are expected to be made unemployed as a result of the Covid crisis.
The watchdog says that would take unemployment levels to 8%, “rather than the 7.5% it currently predict”, reports The Independent.
Hopes of boosting the UK economy by securing free trade deals with non-EU countries appear to be ill-founded too.
The OBR predicts that such agreements would provide only “modest” growth, with a trade deal with the US forecast to add only 0.02% to 0.15% to GDP.
The publication of the OBR report comes as Brexit talks remain deadlocked. EU Commission President Ursula von der Leyen warned yesterday that issues “that can make the difference between deal or no deal” had yet to be resolved as the clock ticks down until the end of the transition period.