Issue link: https://maltatoday.uberflip.com/i/1242414
30.04.2020 6 OPINION George Mangion COVID-19 lockdown - will Brexit end without a trade deal? George Mangion is a senior partner of an audit and consultancy firm, and has over 25 years experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF being instrumental in establishing many companies in Malta and ensured PKF become one of the foremost professional financial service providers on the Island W e hail the recovery of UK prime minister Boris John- son, who was recently re- leased from hospital aer a three-week convalescing period following his Coro- navirusinfection. He proudly resumed meetings with top ministers and advisers at 10 Downing Street while thousands of UK citizens were facing the brunt of be- ing locked down during the past eight weeks of the pandemic. e UK's economy was badly hit by the lockdown and its health authorities are battling the consequences of in- fections, amid even stricter orders for citizens to maintain social distancing. Measures were taken not only to pro- tect the health of the most vulnerable communities, but also their quality of life more broadly – including their fi- nancial security, mental health, access to resources, and social relationships. Even so, the economic and social dis- ruption is clearly visible. e streets of London, so ever fully populated by Londoners and tourists alike - are now bare and gloomy. Elder- ly citizens and other vulnerable per- sons are cocooned at home with only limited scope for venturing out except for buying essential goods or visits to doctors. All airports are closed except for airlines delivering essential cargo and many fear the slowdown will proceed to become a full blown recession un- less a vaccine is quickly developed. Scientists, all predict that a fully tested vaccine which can be produced by the millions and distributed globally will take another year to surface. is unexpected calamity has ex- asperated the country with a double whammy of a recession combined with a possibility of a no deal Brexit. Brex- it will undoubtedly bring long-term systemic changes to the UK economy, politics and society, and there contin- ues to be uncertainty about how leav- ing the EU might affect the lives of the UK's inhabitants. Ideally, a full equal- ities impact assessment is conducted examining the potential legal and soci- oeconomic effects of Brexit on differ- ent groups of people. e concern seems to be that the economic costs of abruptly withdraw- ing from the European Union without a trade deal might be buried by Boris Johnson beneath the damage wreaked by the coronavirus. Can this strategy be resisted and normality maintained, since it goes without saying that vul- nerable groups will be affected? Un- doubtedly, there will be unintended consequences. e poisoned cocktail of Brexit and the coronavirus in the UK, will prob- ably affect badly the lower working classes and the disadvantaged, albeit to a different extent. Indeed, Brexit with- out a trade deal is likely to exacerbate some of the deleterious effects of the virus. It can be argued that leaving the EU without a deal will make it more difficult to fight the aftermath of a pan- demic. e UK left the European Union on 31 January 2020. However, after three and a half years of debate since the 2016 referendum, there remains a lack of clarity about the UK's future rela- tionship with the EU. Some observers predict that, in the end of negotiations it will obtain a Canada-style FTA, plus side deals on fisheries, data, judicial cooperation, transport and energy. Back to the virus syndrome, it is not- ed that, the UK will not seek to main- tain membership of the European Cen- tre for Disease Prevention and Control (ECDP), which oversees the surveil- lance of communicable diseases, in- cluding coronaviruses. Also departed is the European Medical Agency being relocated in Europe. It boosts a centralised procedure for licensing new drugs; or the EU Clin- ical Trials Register which is another casualty under Brexit. e UK left the EU at the end of January and is now excluded from EU decision-making – and any collective support packages, for instance the EU's Coronavirus Re- sponse Investment Initiative – on the pandemic. e British government has stated that it does not plan to take the option to extend the transition period by up to two years. To keep to its promise, the government announced that negotia- tions on the future UK-EU relationship will continue, but they would be con- ducted online due to the coronavirus. One cannot but lament the loss of some EU nationals working in the health and social care sector since Brexit, at a time when they are most needed. Readers may ask - why is there so much fuss about UK leaving without a deal? For a start the consequences of an economic divorce will most proba- bly leave some disadvantaged people with less financial and social resilience therefore more vulnerable to both Brexit and the coronavirus. Time will tell, if the Chancellor's fi- nancial package to fight the outbreak will be sufficient to meet people's core needs. Last week, the European Un- ion's chief negotiator, Michel Barnier, said progress in four areas of discus- sion had been "disappointing", while a British statement said "limited pro- gress was made in bridging the gaps between us and the E.U". One can nev- er be fooled that having eight months till the end of the year is sufficient time to reach a trade deal on complex is- sues which took over 40 years in the making. To be realistic, it is pushing it when Boris Johnson reiterates that there will be no extension beyond the end of the year. ere are complex matters to be ne- gotiated starting on the critical issues of aviation to fisheries, new customs posts at the border and a new immi- gration system. Little can be more vex- atious than agreeing on how best to set up new border checks for both exports and imports. is could result in higher prices, border backlogs and delays, and even shortages of staples, such as food and medicine. When the prospect of a no deal arose last year, some British com- panies and citizens began stockpiling goods. ankfully, one major hurdle was solved that in case of a no deal this will not lead to a so-called hard bor- der between Northern Ireland and the Republic of Ireland, but rather to cus- toms checks on goods traversing the Irish Sea. Last year, saw several international firms which shifted their investments from the UK to elsewhere in the EU. Aerospace giant Airbus is a prominent example, pointing towards a policy of directing funds and jobs away from the UK if there is no trade deal. Such moves could put tens of thousands of British jobs at risk. Without wanting to sound biased in favour of the EU, one must admit that London's role as a world finance leader could also be in jeopardy. Previously, as a full EU member, the UK's finan- cial services provided 11 percent of tax revenue; 44 percent of exports go to the EU. If the majority of economic forecasts are correct and the UK's economy suf- fers post-a no deal Brexit, the negative effect will have an impact on all those groups represented in the low-income bracket (i.e. ethnic minorities, the dis- abled, refugees and asylum seekers, people who are precarious workers) who rely more on public services and benefits and have less disposable in- come and spending power. For those living in poverty or home- less, or suffering job losses, these im- pacts will also be deeply felt. One augurs that Boris Johnson takes the bull by the horns and prioritizes the immediate damages inflicted by the pandemic and in a pragmatic man- ner seeks an extension so as to be ad- equately poised to resolve the tangled web of Brexit. as a full EU member, the UK's financial services provided 11 percent of tax revenue; 44 percent of exports go to the EU