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PROSPER MAGAZINE: DIGITAL EDITION

FEATURE ARTICLE

LOOKING BACK OVER 2020 AND TOWARDS A NEW YEAR

Professor Alex de Ruyter, Director, Centre for Brexit Studies, Birmingham City University gives his views on the last twelve months and what he believes 2021 has in store.

As the Brexit negotiations head into the end-game phase and the country continues to suffer from the ordeals imposed by the Covid-19 pandemic, it certainly seems a pivotal time to reflect on key developments at a local, national and international level and give some thought to the future.

The start of this year saw a triumphant Boris Johnson push his Withdrawal Agreement through Parliament with almost contemptuous ease, having secured a thumping 80-seat majority over then Labour leader Jeremy Corbyn.

 

Thus the UK formally left the European Union on January 31st 2020, but with a Transition Period extending to December 31st of this year during which the status quo ante of continued membership of the EU Single Market and Customs Union would continue to apply, so as to give businesses time to “adjust”.

And then the Covid-19 pandemic hit these shores in March. Despite clear warnings from China and seeing first-hand the terrible experiences in Italy and Spain, the country was ill-prepared for the wave that hit it and the PM half-heartedly imposed a national lockdown weeks after the bulk of scientific opinion said that he should have.

The costs of this, in terms of human life and the impact on the economy, have been calamitous, with the UK one of the hardest-hit in terms of its initial effect, with UK GDP collapsing by over 20% between February and April this year; and also with over 60,000 people having died from Covid-19 to date.

Looking at the region (that is, in terms of the West Midlands Combined Authority area, which includes the Black Country), the subsequent loss of jobs saw a doubling of people signing on for Universal Credit between March and June, as shown in the chart below.

 

The easing of lockdown during the summer and government fiscal stimulus measures (such as “Eat Out to Help Out”) helped fuel and economic recovery of sorts, but it is notable from the chart that the claimant count has held steady regardless. 

The rise in claimant count is also reflected in employment rates; that in the UK fell by 0.8% between September 2019 and September 2020, whereas that in the (wider) West Midlands (NUTS1) region, fell 1.2% during the same period.

However, the resurgence of Covid-19 in recent weeks, across the UK, has necessitated that the Chancellor, Rishi Sunak, continue propping up the economy for far longer than he would have envisaged or desired. Even prior to the “second wave”, in September the UK GDP was still over 8% lower than it had been in January.

To this ongoing fragile domestic situation, at an international level, the other key event, of course, has been the election of the President of the United States and (at the time of writing), Donald Trump’s continuing attempts to dispute the legitimacy of Democrat challenger Joe Biden’s win in the popular vote.

Whatever the expectations of a Biden Presidency going forward (legal challenges by Donald Trump being unlikely to succeed), once Joe Biden assumes office in January next year, much will depend on whether the Democrats can gain control of the Senate (the upper house of the US Congress legislature). 

Win that, via the two Senate “run-off” contests for the state of Georgia in January and they will be able to secure most of their legislative agenda. If the Republicans maintain control of the Senate (as they currently do), then much of a Biden legislative programme – particularly in terms of stimulating the US economy and combatting Covid-19 – can expect to be blocked, resulting in a stalemate.

Either way, a Biden presidency does have consequences for the UK, particularly with Boris Johnson as PM. Biden and other Democrats have made no secret of their disdain for Brexit and for Johnson as being a Trump “clone”. Indeed, they largely regard Johnson, Brexit and Trump as cut from the same cloth, as it were.

Joe Biden has been unequivocal in stating that Brexit must not result in the UK undermining the Northern Ireland peace process if the UK wishes to conclude a trade agreement with the United States. This will by definition, limit the UK Government’s room for manoeuvre in seeking to circumvent the Northern Ireland protocol of the EU withdrawal agreement.

More generally, we can expect a Biden presidency to prioritise rebuilding relationships with the EU (and particularly Germany and France) over that of the UK, as they face the common challenges of Covid-19, tackling climate change, and dealing with the strategic challenge posed by China (and other authoritarian regimes) to “The West”.

So as the clock counts down to our impending departure from the Single Market and Customs Union, time is well and truly running out on securing a trade agreement with the EU so as to avoid a “No Deal” outcome. 

Not that a deal will end the misery for businesses in the region – even if we get a trade agreement in place (and that’s a BIG if), it will be a “bare-bones” zero-tariff zero-quota free trade agreement for goods. 

So services will be excluded and firms trading with EU countries (and Northern Ireland if the product is deemed capable of going on into the Republic of Ireland) will face new barriers in the form of customs declarations, sanitary and phytosanitary checks, VAT changes, and other security checks – on both sides of the border.

With surveys in the region suggesting that many businesses still are more concerned with Covid-19 as opposed to Brexit, many may be in for a shock come January 1st. 

There is thus a strong imperative for the UK Government to get its act together and ensure that any disruption over the next few months is kept to a minimum. I have written elsewhere about the sorts of measures that will be needed to assist businesses (particularly those in our key manufacturing sectors such as automotive), but it is worth recapping some of them here:

• Potential business tax/rates holidays

• Equity stakes in firms that are key national strategic assets for the region

• Training funding to help companies retrain and reskill workers for emergent (green) sectors

• Loan funds for firms upstream in supply chains and funds to support supply chain diversification

• Local procurement strategies in line with the UK’s obligations under international agreements

 

• Establish special enterprise zones with strong connectivity and a range of tax incentives

As the situation develops, it will be interesting to say the least, how our economy and society fare over the coming months.

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