Self-Inflicted Wound of Brexit Will Make It Harder for UK to Recover From COVID

Even as Britain pivots its pandemic response and struggles to reopen businesses and schools amid the global pandemic, it is simultaneously hurtling toward its final, year-end break with the European Union (EU) — a self-inflicted wound that will be even harder to heal from in the age of COVID-19, as it will not have access to the huge pool of rescue funds recently negotiated by the 27 remaining EU nations.

Starting in mid-June, the British government pivoted in its pandemic response and Prime Minister Boris Johnson, as well as his cabinet ministers, began urging residents to start working and traveling and spending their money again. On July 4, to huge fanfare, the pubs reopened. But even as the government has been promoting a get-back-to-normal message, opening not only pubs but also restaurants again, and urging schools to hold in-person classes, Britain is edging closer to Brexit and its accompanying giant scale of dislocation.

Brits like to travel. In fact, on average, each of Britain’s more than 60 million residents traveled overseas nearly twice in 2019. Yet, in June, the government confirmed that come year’s end, British residents would no longer be covered by the European Health Insurance Card (EHIC) system, which allows anyone within the EU to have health coverage whenever they travel to other countries in the system. Come January 1, 2021, Brits traveling to the EU will need to buy health insurance, or, if they don’t buy it, to risk catastrophic medical bills should they fall sick. In practice, this may well mean that those with preexisting conditions or the elderly can no longer travel abroad without huge economic risk to themselves and their families.

Meanwhile, British residents hoping to relocate to the continent to seek work will no longer have access to the labor market of the 27 member states of Europe. And while Britain had hoped to attract the world’s best and brightest through replacing the EU free movement of labor with a global, points-based immigration system — that would apply to EU residents and residents from the rest of the world alike — COVID-19 has rendered that something of a mockery; in fact, given the scale of economic dislocation unleashed in the U.K. by the pandemic, it’s entirely possible that Britain will hang out a shingle saying that it is open for high-skilled immigrants only to find that few migrants take up the offer to come to a beggared, humbled, nativist, post-Brexit U.K.

And the unraveling isn’t restricted to the labor market. If a comprehensive agreement with the EU isn’t reached by year’s end, it’s unclear if the U.K. will even be able to retain its reciprocal relationships allowing British students to study overseas and EU students to come and study in the U.K., or allowing the transfer of scientific information between member countries. Nearly a half-century of carefully crafted mutual benefits between Britain and its European neighbors are now being shredded.

The ugly, self-defeating similarities with Trump’s U.S. are revealing. Trump has spent much of the past four years claiming that he will “Make America Great Again,” in large part by building physical and legal barriers against immigrants. But, with the shambolic response to the COVID-19 pandemic resulting in millions of Americans being infected, in the end it has turned out that it is the rest of the world that does not want Americans coming to them. One country after another has barred entry to Americans. There are, at this point, fewer than two dozen countries globally that will admit American travelers. And even among these countries, several — the U.K. among them — require Americans to quarantine upon arrival.

While the U.K. and its residents haven’t been shunned in quite the same way as a result of failing to get COVID-19 infection rates under control, Johnson’s Brexit-Britain is seeing a similar contraction in status, a similar shrinkage in its global footprint and soft-power reputation. It’s not only the EHIC card debacle, which will make travel so much more cumbersome for Brits, and which will, in consequence, lock Brits behind their own legal and nationalistic walls; it’s also that the country’s relevance in Europe is shriveling. Johnson’s government stumbled badly in the early days of the pandemic, resulting in a higher per capita death rate than practically anywhere else on Earth — and the resulting economic implosion has, in consequence, been deeper than that of most other countries in Europe. The Organization for Economic Cooperation and Development (OECD) estimates that the U.K.’s GDP will decline by 11.5 percent this year, nearly twice the decline that Germany is going to experience. Almost 20 years of economic growth has suddenly evaporated, and Britain’s public finances are looking increasingly precarious as the level of debt the government has borrowed to keep the country afloat during the pandemic piles up.

In 2021, while the rest of the EU will have access to a pool of hundreds of billions of euros to reinflate and to reimagine national economies as they come out of the COVID crisis, because Britain is no longer part of the EU, it will be navigating these treacherous waters alone.

At the moment, the British government is preventing a surge in unemployment by backstopping 80 percent of the wages of furloughed workers; that wage-subsidy program was initially slated to end in August but has now been extended through October. It is protecting the jobs of a staggering 7.5 million workers. When it ends later this year, estimates are that, even as the economy reopens, millions of those workers will end up unemployed. The OECD predicts Britain will see an unemployment rate of more than 11 percent. But that’s the optimistic end of the spectrum. If the country is badly hit by a second wave of infections, unemployment could, the OECD calculates, exceed 15 percent of the workforce. In other words, Britain looks set to follow in the U.S.’s catastrophic path toward Depression-era levels of unemployment when it comes to damage to the labor market caused by the pandemic and the short-sighted government responses to it.

Things could well end up even worse in London, long the financial hub of the continent. The city was already being cut down in size by Brexit even before COVID. Now, it is facing many of the same woes that New York City is suddenly beset by, as Gilded Age prosperity is replaced by unrelenting austerity. The metropolis’s economy is going to have to reinvent itself in an era in which commercial real estate is suddenly far less valuable, public transport systems are seen as health hazards, and service industries, from restaurants to hotels to entertainment and culture hubs, have been ground to dust. Yet London is, in some ways, even more vulnerable than New York: for in the Brexit era, those global companies wanting a European hub from which to do business are far less likely to choose London over, say, Paris, Dublin, Amsterdam or Frankfurt. The overlay of pandemic with Brexit could undo decades of wealth and influence creation in London.

Moreover, Johnson’s hope that he could protect British trade interests and London’s financial status by tempting the U.S. with a quick and comprehensive free-trade agreement looks to have gone the way of the dodo.

Trump has, in the past, dangled out the prospect of a sweeping trade deal once Britain fully exited from the EU; but, as with so much else this year, the vastly complex negotiating process never really got off the ground once the pandemic hit. There were still negotiating sessions held in May and June, but those negotiations haven’t yet come close to generating an agreement, and there is little sign that Congress will swiftly unite around any proposals the trade negotiators do put forward. In this summer of discontent, Trump’s team is interested in nothing except the perpetuation of power in the run-up to the November election; and there seems neither appetite nor ability in the halls of power in Washington, D.C., to forge any kind of durable new arrangements with any allies. To the contrary, in the COVID-19 world, Trump’s default response has been to double down on his xenophobia and protectionism, shutting out allies and foes alike, and seeking to create a Fortress America.

All of which leaves Johnson’s U.K. shockingly isolated and economically fragile. Brexit was always based on an illusion — it floated aloft on a gaseous pillow of nostalgia for an imperial past long gone. Now, with COVID-19 having upended the global economic and political order, even that illusion has gone. Come 2021, Britain faces a calamity, a cutting-down-to-size that will likely destroy the standard of living for much of its populace and leave the country struggling on the margins of a Europe that is embracing collective, continental solutions to the great challenges of the age.

None of this had to happen. As with Trumpism in the United States, the Brexit that Britain is now hurtling toward is a self-inflicted wound that, once inflicted, will prove all but impossible to fully heal from.