Covid-19 has pushed the economy into the worst recession on record. GDP fell by a fifth in the three months to June, the biggest quarterly drop of any G7 nation. This is surely the worst possible moment for the government to choose to inflict a further economic shock on the country. Yet that is exactly what Boris Johnson is planning to do. On 1 January, the Brexit transition period will come to an end and Britain will either trade on a no-deal basis with the European Union or, at best, with a bare-bones free trade agreement.
The government’s economic forecasts predict that a no-deal Brexit would depress GDP by more than seven percentage points over 15 years and that a free trade deal outside the customs union and single market would reduce it by just under five points. But even Brexit’s most ardent proponents, who implausibly deny that creating friction in the trading relationship with our closest neighbours would significantly reduce growth over the long term, would concede that there will be a short-term shock to moving to a different relationship. It is a mark of just how mind-bogglingly ideological Johnson and his cabinet are that they refused to ask the EU for the transition period extension earlier this year that would surely have been granted.
But regardless of the ruinous impact of Covid-19, the government’s mantra continues to be Brexit at any cost. The negotiations this week move into a critical phase. A trade deal must be reached by the end of October to allow time to ratify any agreement. Yet the sticking point remains the same: the government wants to maintain the benefits of a close trading relationship with the EU without reaching agreement on a shared set of regulatory standards and state aid rules – the so-called “level playing field” – that would prevent either UK or EU businesses being able to undercut each other in the other’s markets.
For Boris Johnson, Brexit was about “taking back control”, a populist slogan that trips off the tongue but that is misleading in the extreme. The reality of the 21st-century’s interdependent global economy is that economic success is heavily reliant on reaching trade deals. The very nature of trade deals is that they involve sacrificing old-fashioned notions of national sovereignty in relation to regulatory standards in exchange for access to each others’ markets. With the EU, there are at least democratic mechanisms to hold its institutions to account for those standards. If Brexit Britain were to become more reliant on trade deals with countries such as the US and China, we would be pushed into weaker environmental, consumer and employment standards as a price of such deals with little democratic scrutiny of those agreements.
There will be no trade deal with the EU next year unless both sides can agree on fishing rights and on a state aid regime. It is not in the EU’s interests to compromise the integrity of its single market by yielding to UK demands on state aid; the UK has not even published a draft post-Brexit state aid regime to inform the talks. Save for some vague briefing to the press about big subsidies for UK technology companies, it is not even clear what freedoms the government wants on state aid that would not be permitted under EU rules, which already allow a significant degree of flexibility. The government seems to expect to be able to advance a negotiation without setting out what it wants. It is using critical trade negotiations for domestic political posturing. It is highly irresponsible.
The risk of a no deal remains very real. But even were the sort of bare-bones trade deal the government is aiming for to be reached, the costs would be high. There will still be a huge amount of disruption in January as businesses adapt to a new customs regime. Government data suggests that, unsurprisingly, in the wake of Covid-19, most companies have not begun to prepare and the focus of Whitehall and local government has rightly been on managing the public health crisis.
Any form of hard Brexit, whether a basic free trade agreement or a no deal, will also gravely endanger the union. The Northern Ireland protocol guarantees there will be no border checks on the island of Ireland, but it remains to be seen what impact imposing a customs border and, potentially tariffs, on the movement of goods across the Irish Sea will have on the politics and economy of Northern Ireland. The UK government’s terrible handling of the pandemic has strengthened the cause for Scottish independence and the fallout from a hard Brexit will probably boost the SNP in next May’s Holyrood elections, making it more difficult for Westminster to continue to refuse Nicola Sturgeon a second independence referendum. Johnson may well go down in history as the prime minister who not just oversaw one of the world’s worst Covid-19 death rates, or took Britain out of the EU in a damaging Brexit, but who paved the way for the dissolution of the union.
This is shocking but not surprising. Johnson won the referendum, then his premiership and an election, using an empty populist slogan that provides no substantial basis for government. Brexit has hollowed out the Conservative party, largely stripping the cabinet of its reserves of competence and talent, leaving behind some of the least able ministers in living memory. We have paid a terrible price for this in our battle with the coronavirus, but with the next phase of Brexit and its potential impact on the union, there is more still to come.