What would a no-deal Brexit do to the economy on top of Covid-19?

Linda J. Dodson

After three years Tombs estimates overall prices will be around 2pc higher than they would have been without a deal, effectively clipping that amount from families’ living standards.


Business investment has been hit hard by the pandemic. Companies are focused on staying afloat, borrowing to avoid collapse instead of taking on debt to invest in future growth.

Even as the economy recovers, businesses will remain cautious when they do not know what form Brexit will take, according to Paul Dales at Capital Economics.

“The recent behaviour of the government appears to have increased the chances of something like a no deal Brexit when the transition period ends on December 31,” he said.

“Even if that didn’t materialise, the uncertainty may further crimp business investment in the coming months.

“The recent surge in virus cases, all the talk of tax hikes and the prospect of yet more Brexit uncertainty means the near-term outlook is getting a bit darker.”


The net effect of this on the economy is always tricky to calculate, and currently next to impossible. At a time when GDP is surging at more than 5pc each month, restrictions are being reimposed, confidence is being alternately boosted by schemes such as ‘eat out to help out’ and trashed by local lockdowns, it is hard to accurately estimate or observe the impact of Brexit uncertainty.

Predictions from the Office for Budget Responsibility and International Monetary Fund last year indicated a no deal Brexit could hit GDP by around 2pc before a recovery kicks in. That sounds small in the context of a Covid crash more than 10-times larger, but is still significant and painful at a time when the country desperately needs to recover.

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