UK and European officials try to agree on new terms of trade after Brexit came into effect in January, but progress has been painfully slow and time is running out to avoid a break when the transitional arrangements expire 2020.
British companies have already borrowed nearly £ 35 billion ($ 44.4 billion) from government coronavirus relief programs, according to figures released Tuesday by the Treasury. And nearly 9 million people - about 27% of the workforce - rely on the state to pay some or all of their wages at a cost of £ 19.6 billion ($ 22.2 billion). ) until now.
Unemployment in the United Kingdom could climb to almost 15% in the fourth quarter in the event of a second outbreak of coronavirus, according to the Organization for Economic Co-operation and Development.
The Paris-based agency said on Wednesday that it expects the UK economy to contract 11.5% this year even if a basic free trade agreement with the European Union is concluded and that a second wave of infections is avoided.
This is the worst contraction expected among the major economies. And if infections rise again and more stringent social distancing measures are reintroduced, GDP could plummet by 14%, the OECD added.
The most exposed companies are the hotel and travel sectors. Many restaurants and pubs fear they will not survive, even if they are allowed to reopen next month as planned, due to the rules of social distancing.
Cabinet ministers are now pushing for the UK two-meter social distancing rule to be lowered to one meter, in line with World Health Organization guidelines, a government source informed of the discussions. This will be crucial for the reopening of bars, restaurants and theaters and for ensuring the functioning of public transport.
Travel and tourism are responsible for nearly 4 million jobs in the UK, or 11% of the workforce and 9% of UK GDP in 2019, according to the World Travel and Tourism Council. He estimates that 1.2 million of these jobs could be lost in 2020 due to the pandemic.
Brexit deadline looms
Given the damage that a Brexit without an agreement will cause an economy already on its knees, Britain may have no choice but to extend the deadline for trade negotiations. He has until the end of this month to make such a request. Prime Minister Boris Johnson has always said that he does not want to do this.
David Frost, chief Brexit negotiator for the UK, said in a statement that "progress remains limited", but insisted that the talks were "positive".
"If we have a political calendar that brings us to a plunge deal in December that will be catastrophic for British businesses - they will not be ready," said Fairbairn.
The CBI presented proposals for a "job-rich economic recovery" in a letter to Johnson on Thursday. The group called on the government to prioritize skills development for young people, invest in the green economy and directly stimulate small businesses and those focused on high-growth sectors.
The OECD predicts that unemployment will reach 7.2% in Britain by the end of 2021, even if a second wave of infections is prevented and a trade agreement with the European Union enters into force. This compares to 3.9% at the end of the first quarter of this year.
- Charles Riley, Julia Horowitz, Luke McGee, Chris Liakos and Sebastian Shukla contributed to this report.
