The combination of COVID-19 and a failure to secure a post-Brexit trade deal with the European Union could cost the United Kingdom around 134 billion pounds ($174 billion) each year in lost GDP for a decade, research by law firm Baker & McKenzie showed.
Prime Minister Boris Johnson has set Oct. 15 as a deadline for clinching a post-Brexit trade deal which would kick in when the United Kingdom leaves informal EU membership at the end of this year.
The COVID-19 outbreak will cut Britain’s GDP by 2.2% below the levels anticipated before the outbreak, Baker & McKenzie said in a report titled “The Future of UK Trade: Merged Realities of Brexit and COVID-19.”
On top of that, Brexit, even with a trade deal, would cut GDP by 3.1 per cent in the long-run relative to a hypothetical scenario where the UK remained in the EU, while exports of goods would be 6.3 per cent lower, Baker & McKenzie said.
But without a trade deal, the cost of Brexit would increase to 3.9 per cent of GDP in the long run, Baker & McKenzie said.
“Despite businesses taking steps to offset the added costs of Brexit by reconfiguring supply chains, the decline in export revenues for UK manufacturers will be substantial,” Baker & McKenzie said.
“With the costs of the UK’s departure from the EU likely to be very high, the government will need to use all the tools at its disposal to help mitigate the economic damage.”
Opponents of Britain’s exit say Brexit will cost the country dearly in both money and power for decades to come, though supporters say estimates of the economic impact have been overly pessimistic.
Supporters of Brexit say that while there will be some short term costs, the long term economic and political benefits could far outweigh the costs as the United Kingdom would be free to shape its own priorities.