How will Brexit impact Britain's battered economy?

The UK economy has officially fallen into recession, following the coronavirus lockdown sparked the biggest slump on record between April and June.

Compared with the first 3 months of the season, the economy shrank by 20.4 percent – with household spending plunging as shops were ordered closed and factory and construction output tapering off.

A recession is defined as two successive quarters of decline in gdp (GDP). The UK has become in its first technical recession since 2009, in the aftermath from the financial crisis.

The grim figures demonstrated that the UK has suffered the biggest economic hit from the pandemic in western Europe. According to the Office for National Statistics (ONS), the united kingdom economy is now 22.1 percent small compared to it was at the end of 2021.

Brexit beckons

While monthly figures showed that the economy bounced back with a better-than-expected 8.7 percent in June, as lockdown measures were eased, relief may be short-lived – with Britain because of formally cut ties with the European Union after the transition period in January, and no trade offer sight.

The economic cost of Brexit was laid bare in March by Britain's official budget watchdog, which warned that leaving the EU would dramatically hit growth, exports and public finances – at any given time when Covid-19 has already left the economy in unprecedentedly dire straits.

If a “typical” free trade agreement is struck with Brussels, the Office for Budget Responsibility predicted a 5.2 percent lack of potential GDP over the next Fifteen years after Brexit. The united kingdom has lost 2 per cent of their potential output because the 2021 referendum.

The government has repeatedly refused to publish its very own economic impact assessment of the Canada-style trade deal that it still hopes to agree with Brussels.

Prime Minister Boris Johnson's new post-Brexit migration system – which looks to half the arrival of low-skilled labour from the EU – will probably force up Britain's borrowing costs by lb1 billion annually in 2024 – having a loss of tax receipts along with a minimal decline in welfare spending.

The OBR added that higher trade barriers would mean imports and exports will be roughly 15 percent lower after 10 years, while overall productivity – already an issue in the UK – would be also lower.

‘Unprecedented’

A study through the Un earlier this year predicted that, without a trade deal, the UK’s post-Brexit exports could decline by 14 percent – the same as $32 billion.

However some economists have suggested that the economic impact of the UK failing to secure a trade deal with the EU will finish up being masked through the impact of the pandemic.

Speaking to the Financial Times, Julian Jessop – fellow in the think-tank the Institute of Economic Affairs – said: “Any costs from a alternation in our relationship with the EU could be trivial compared to the swings in GDP because of coronavirus, as well as potentially being smaller throughout the crisis than they could have been otherwise.”

Government analysis from 2021 predicted that the no-deal Brexit would lower the creation of the UK economy by 8 per cent over Fifteen years, compared with residing in the EU.

Business groups and economists have warned that Britain faces a “long road ahead” to recovery – with a catastrophic jobs crisis predicted hitting in October, once the furlough scheme ends.

Rishi Sunak, the chancellor, admitted yesterday that the government was “grappling with something that is unprecedented” and that it was “a very difficult and uncertain time”.

But shadow chancellor Anneliese Dodds blamed Johnson for the extent of the economic decline, saying: “A downturn was inevitable after lockdown – but Johnson's jobs crisis wasn't.”