The Covid 19 pandemic and Brexit have massively impacted the UK’s economy. On February 1st, 2020, Britain withdrew from European Atomic Energy Community and European Union while the world was in total confusion about COVID19 and its prospective impact on the people and the economy. Known as Brexit, UK’s exit from the European Union and European Atomic Energy Community marked a new era in the UK’s economy. The exit deprived Britain of its rights to single market membership, which has led to lower productivity growth and lower potential growth.
Last year, when COVID-19 patients hit all new numbers with thousands succumbing to the virus and thousands be bedridden, almost all forecasts on Britain’s economy gave everyone goosebumps. As lockdowns became the talk of the day and businesses closed down, the future of the UK economy was unknown. Simply put, nobody could give an idea of where the economy would be in a year. Fast forward to 2021, after the UK introduced a vaccination program and lockdowns eased, the UK’s economy is slowly getting stronger and better.
Covid-19 and Permanent Job Losses
The move to actualize social distancing and reduce direct contacts, which are leading avenues for contacting COVID-19, saw the permanent closure of some companies and the transition to online workspaces. Now, people are travelling less, and office operations have minimized, leading to a significant decrease in office workspace services and related services. As companies move their operations to the internet, millions of employees have lost their jobs, thus negatively affecting the economy.
The UK government has COVID recovery plans in place, but even after these plans are actualized, we are looking at a situation where thousands will be jobless. The outlook of the structural employment and the proposed recovery employment structure presents us with a clear picture of the possibility of thousands of people working in physical offices losing their jobs. That only talks of the impact COVID will have on the economy, not to mention the effect Brexit and the climate crisis will have on the economy.
As companies seek to automate most processes and get most operations piloted online, office operations will be futile. Many of those working in this sector will no longer have the income to depend on. Even after the Britain government has actualized its plans to recover the economy, it’s a fact that many of those in the traditional business settings will be jobless.
How the Brexit Affects the Economy of the United Kingdom
Brexit has worsened UK’s already struggling economy. While it has its benefits, Brexit has affected Britain’s economy in the following ways:
The Brexit deal enables UK companies to enjoy better tariffs on their export and import goods. However, the exit from the European Union will see UK companies pay over $10.3 billion annually on imports and exports. The costs will hit new highs if the goods are delayed by customs checks at the snarl and border supply chains. As delays in the custom checks increase, delivery of goods to and out of UK companies will be delayed forcing some industries to halt their production due to lack of necessary raw materials.
Transportation companies and truckers are the most affected since drivers are being kept waiting for hours during negative Covid-19 tests and at the UK borders waiting for customs checks. These delays in goods delivery will see some companies unable to meet their client’s demands, forcing them to shift their loyalty elsewhere. The resultant impact will be low sales and the inability to maintain their financial stability, leading to unexpected closures.
2. Worker Shortages
The currently active Britain Immigration system has seen the UK receiving only qualified workers. The program intends to minimize UK’s over reliable on low-skilled and cheap labour. Immigration of a vital item of discussion in the Brexit 2016 referendum. After the actualization of the referendum, the United Kingdom has suffered from the reduction of EU workforces. Now, UK companies are experiencing an increase in labour shortages.
The National Farmers Union says that the UK farms require approximately 80,000 seasonal workers annually to manage bountiful harvests successfully. The NFU wants the UK government to initiate and implement a new seasonal worker program to help them get workers to handle harvests. According to National Farmers’ Union, if the government does nothing about that, most farmers will have to deal with losses linked to crops rotting in the fields. The union strongly believes that the UK’s horticultural industry’s success depends on the workforce sourced out of the United Kingdom.
What’s Truly Needed for the UK Economy Recovery?
Recovering the UK’s economy isn’t going to be a one-year goal. A lot has to be modified, and the lifestyle of UK residents has to change significantly. The first move is for the UK government to invest enough to overhaul the construction sector and see the actualization of the renewable energy workforce. Britain has to handle the uphill task of pumping more life into the retrofit and construction industry, which though active, isn’t as lively as it should be.
The Britain government will also need to invest in electric vehicle rollout. The UK government needs to invest significantly in electric vehicle infrastructure and electric vehicle manufacturing. In other words, the British government has made a significant structural shift in its economy to tap from the quick-growing electric car market.
In addition, the UK must put measures in place to fuel the move to zero-carbon to prevent potential instances of climate breakdown. The move to a green economy must not overlook the welfare of the workforce in the affected industry, either. According to financial advisors and economists, the cost of investing in trends that will help the pandemic recovery and get the UK economy to its feet is lower compared to the cost of not investing at all.
The goal should be to equalize or even increase the ratio of GDP to debt ratio in the next few years. Britain has to recover from the potential economic drowning by providing a healthy business environment for companies to source goods in and out of the country with ease without neglecting the financial health and stability of the workers that will be affected by the shift to a better economy.
Challenges that May Make It Hard to Recover the United Kingdom Economy
The United Kingdom economy will definitely bounce back, and it won’t be long the country would have its lost economic glory back. However, that would happen if the UK government manages to effectively tackle the existing and the potential challenges that threaten to denature any efforts to recoup the economy. The following are challenges that must be handled for the economy to be recouped fast:
1. The Pandemic Has Left the Economy in Shambles
The UK’s economy wasn’t fashioned ready to handle the pandemic. The government invested lots of unplanned budgets on managing the pandemic, which would take the right economic adjustments to recoup. That alone left companies, central banks, and the UK government with no option but to take loans to keep businesses running and help pay employees.
All these accumulated debts will have to be paid, and as you know, paying debts always comes with many challenges, especially in the case of a struggling business. It’s okay to hope for a quick COVID recovery, but unless the challenge of the already shambled economy is tackled, it will take longer for us to achieve positive results.
2. Hundreds of Businesses are on the Verge of Closing
The UK government has been pushing the motion to see banks give loans to the small and struggling businesses to help them deal with the COVID-19 menace. Sadly, by the time any financial help is given to any of these small businesses, most of them will be already on the verge of closure. Besides, the accumulating loans on the small businesses in a market that’s not so favourable will mean more financial burden, which could take a toll on the businesses later.
3. High Potential of Crash
The UK’s largest financial crash of 2008 was internally motivated, so it didn’t affect its economy to extreme heights. The COVID-19 financial crash is externally motivated and allows minimal to no room for total control. Therefore, its potential impact scale is exceptionally high, and the worst part is that the impact may be permanent.
A perfect example of what the COVID-19 financial crash looks like is the ever-increasing unemployment numbers every new day. The UK’s GDP is expected to fall further if the pandemic persists and no rigid plans to curb its effects are set in place. Therefore, for the UK’s economy to come out stronger after the recovery plans are implemented, the COVID-19 and Brexit-related challenges must be addressed with utmost urgency.
The UK’s economy isn’t so wasted compared to other developed countries with the same or higher GDP. However, Britain’s government needs smarter and more country-centred COVID recovery approaches to get the economy back to its original shape. They need to put into place measures that will see businesses and industries prevail, but not at the expense of workers.