UK and EU officials are trying to agree on new terms of trade after Brexit took effect in January, but progress has been slow and time is running out to prevent it from collapsing when transitional arrangements expire in late 2020.
British companies have already borrowed almost £ 35bn ($ 44.4bn) under government coronavirus relief programs, according to data released by the UK Treasury on Tuesday. And nearly 9 million people – about 27% of the workforce – rely on the state to pay all or part of their salary so far at a cost of £ 19.6 billion ($ 22.2 billion).
Unemployment in the UK could rise to almost 15% in the fourth quarter if a second coronavirus epidemic occurs, according to the Organization for Economic Co-operation and Development.
The Paris-based Paris-based agency said Wednesday it expects the British economy to shrink by 11.5% this year, even if a basic free trade agreement is reached with the European Union and a second wave of contagion is avoided.
This is the worst projected decline in major economies. And if infections re-emerge and stricter measures of social distancing are reintroduced, GDP could collapse by 14%, the OECD added.
Companies from the hospitality and tourism industries are at greatest risk. Many restaurants and pubs fear they will not survive, even if they are allowed to reopen next month, as planned, due to social distancing rules.
Cabinet ministers are now lobbying for the British two-meter social distance rule to be lowered to one meter, in line with the instructions of the World Health Organization, a government source informed of the discussions said. This will be key to reopening bars, restaurants and theaters and to ensuring public transport.
Travel and tourism are responsible for almost 4 million jobs in the UK, or 11% of the workforce, and 9% of UK GDP in 2019, according to the World Travel and Tourism Council. It is estimated that 1.2 million of those jobs could be lost in 2020 due to the pandemic.
The deadline for Brexit is coming
Given the damage that Brexit will cause to an economy already on its knees without a treaty, Britain may have no choice but to extend the deadline for trade negotiations. He has such a request by the end of this month. Prime Minister Boris Johnson has insisted he does not want to do that.
David Frost, the chief negotiator on Brexit for the United Kingdom, said in a statement that “progress remains limited”, but insisted the talks were “positive in tone”.
“If we have a political timeframe that leads us to a fast-paced deal in December that will be disastrous for British business – they won’t be ready,” according to Fairbairn.
In a letter to Johnson on Thursday, the CBI made proposals for a “job-rich economic recovery.” The group called on the government to prioritize young people, invest in the green economy and focus on small businesses and those focused on high-growth sectors.
The OECD expects unemployment in Britain to reach 7.2% by the end of 2021, even if a second wave of infections is avoided and a trade agreement with the European Union enters into force. That’s up 3.9% at the end of the first quarter of this year.
– Charles Riley, Julia Horowitz, Luke McGee, Chris Liakos and Sebastian Shukla contributed to this report.