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No-Deal Brexit Will Hit UK Economy More Than COVID-19: Study

The "no-deal" Brexit could be three times more expensive for Britain's economy in the long term than the coronavirus outbreak, a new study published on Tuesday warned.

The UK think tank in Changing Europe said that the political and economic consequences of the pandemic are likely to offset or mask the inability to achieve a trade deal with the EU, reports BSS.

But, in the short term, the absence of a new structured trade agreement with Brussels will be bad news for economic growth and longer than the long-term health crisis.

The think-tank, which collaborated with the London School of Economics, said that in the coming years, more than if the United Kingdom had chosen to stay in the bloc would have affected growth.

“The claim that the economic impacts of Covid-19 dwarf those of Brexit is almost certainly correct in the short term,” its authors wrote.

“Not even the most pessimistic scenarios suggest that a no-deal Brexit would lead to a fall in output comparable to that seen in the second quarter of 2020.

“However — assuming a reasonably strong recovery, and that government policies succeed in avoiding persistent mass unemployment — in the long run, Brexit is likely to be more significant.

“Our modelling with LSE of the impact of a no-deal Brexit suggests that the total cost to the UK economy over the longer term will be two to three times as large as that implied by the Bank of England’s forecast for the impact of Covid-19.”

The study estimated that the negative effect on a gross domestic product will be 5.7 per cent over the next 15 years relative to the current level, while GDP is expected to have a 2.1 per cent effect on Covid-19.

The estimates come amid the lack of information about the overall effects of the pandemic and the second wave of infections reached Europe.

Effects to show up at borders

The report claimed that the most severe and obvious effects of a "no deal" will be seen at borders, with the possibility of queues and shortages of some foods and medicines.

The reintroduction of customs duties and paperwork for importers and exporters would raise prices for companies and consumers alike.

Britain and the European Union have set a deadline of 15 October for finding an agreement, but weeks of negotiations remain deadlocked in key areas such as competition and fisheries.

Prime Minister Boris Johnson said he would leave the talks if there was no agreement, despite having assured that it would be fast and simple to get one.

Britain will then negotiate with the EU — its main trading partner — under the laws of the World Trade Organization from 1 January 2020.

“While the prime minister said no deal is a ‘good outcome’, our report shows that it may lead to significant disruption and will have a significant economic impact,” said Anand Menon, director of the UK in a Changing Europe.

“As significant will be the political fallout of no-deal, particularly with the UK and EU, but also inside the UK, particularly Northern Ireland, and internationally too.”

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