Covid-19 and no-deal Brexit may cost UK $174bn annually

The UK could end up paying costs of $174bn (£134bn) a year over the impact of Covid-19 and no-deal Brexit on the national economy, said the latest report by Baker & McKenzie.

In its latest report called ‘The Future of UK Trade: Merged Realities of Brexit and Covid-19’ that was published on Monday, the agency explores how the pandemic and the divorce from the European Union will impact local businesses and the economy.

The report analysed the effects on four UK goods manufacturing sectors — automotive, consumer, healthcare and technology — as well as UK GDP over the next decade.

The research revealed that the pandemic and the divorce crisis in the long-term, could lead to a potential £134bn (6%) reduction in UK GDP over the next decade as compared with 2019.

The Covid-19 outbreak will cut Britain’s GDP by 2.2% below the levels anticipated before the outbreak and Brexit, even with a trade deal, would cut GDP by 3.1% in the long-run, while exports of goods would be 6.3% lower, Baker & McKenzie said.

But without a trade deal, the cost of Brexit would increase to 3.9% of GDP in the long run, the report added.

As a result of the analysis, the agency called for businesses to prepare for both a deal and no-deal scenario to try and mitigate the effects of the crisis.

“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.”

Prime Minister Boris Johnson set 15 October as a deadline for clinching a post-Brexit trade deal which would kick in at the end of this year when the transition period finishes.