I HAVE been asked on many occasions to compare the economic costs of Covid with those of Brexit.
On one level, there is simply no comparison. During the height of lockdown, economic activity in Scotland fell by a fifth, and did so in record time. Many businesses in retail, hospitality and tourism have seen their entire livelihoods taken from them. Even with a partial recovery in recent months, the Office for Budget Responsibility believes that the UK economy is still 10 per cent smaller than it was this time last year – one of the deepest recessions of any country in the OECD.
Nearly 400,000 redundancies were announced across the UK in just the three months to October. Even the most pessimistic forecasts of the cost of Brexit do not come close to this.
It would be foolhardy, however, to conclude that against such a backdrop we have nothing to fear from Brexit.
Many businesses remain unprepared for the practical challenges that will hit on January 1, whether that be the documentation required for shipping goods overseas, accessing relevant product safety permits, or following new rules on overseas travel.
Even fewer seem to be aware of the changes when sending goods to Northern Ireland – a market worth over £1 billion to Scotland each year. In our commentary this week, we pointed out that sectors insulated from the worst effects of the Covid crisis, such as manufacturing, food and drink, and farming and fishing, are those most at risk from Brexit disruption regardless of the outcome of the UK-EU future relationship negotiations.
But the key contrast between Covid and Brexit is timing. While the economic hit from Covid has been sudden and deep, the economic impact of the UK’s long walk towards Brexit will shape our economy for decades.
With Covid, the end of the economic crisis is at least identifiable. Yes, there remain huge challenges to navigate over the next few months, and structural damage is inevitable. But, with the right policies and business strategies, our economy will recover.
Brexit represents a subtler, but permanent, hit to our prosperity. The EU is Scotland’s largest international trading partner. We trade more with the EU than we do with North America, South America, Asia, Australasia and the Middle East combined. Being part of a wider common market and community doesn’t just provide access to new customers, but all the evidence points to it helping to drive improvements in innovation, competition and productivity – areas that the Scottish economy needs all the help it can get.
There is a certain irony too that supposedly one of the main arguments for Brexit was to free business from red tape. Now, hundreds of thousands of firms are having to reprofile their spending plans to meet the huge logistical demands now placed on them simply to keep selling to markets that they have accessed for years.
Of course, some will tell you that the UK stands on the cusp of unlocking a glittering array of shiny new opportunities. These are likely to be the same people who told you that trade deals are easy to negotiate. While new opportunities will emerge, the cost of opening up those opportunities is likely to be far exceeded by the costs incurred from closing the door on existing partnerships.
If there was any doubt, recent weeks have shown that Brexit wasn’t about making the UK economically stronger. Nor was there an effective plan to manage the transition. Sadly, it is those far removed from the corridors of power who will be worse off from Brexit long after the Covid crisis fades from focus.