No-Deal Brexit Will Hurt UK Economy Post COVID - thinktank

The Paris-based Organisation for Economic Co-operation and Development has released its opinion on the possibility of a disorderly Brexit. The thinktank believes the UK Economy will shrink to 6.5% smaller.

While leaders are convening for a critical EU summit in Brussels, the influential OECD has confirmed what many have feared. The COVID crisis is complicating what is already a disorderly Brexit. With the transition period coming close to an end, companies are scrambling to meet the deadline.

Without a free trade agreement sealed between the UK and EU by the end of December, the UK economy would experience a decline of 6.5% lower. According to the thinktank, such would not be the case if existing agreements are maintained.

The current developments in trying to close a deal have much more potential to harm the cross-border trade. A no-deal Brexit would severely impact manufacturing, textile production, food exportation, and the UK car industry. Exports would fall at a sharp 30%.

Alvaro Pereira, OECD director of the country studies said:

"We know Covid has been the largest economic shock and social shock in the last few decades all across the world. Brexit compounds the issue.

"The most important thing in the next few days and months is to focus on a deal, so the closest possible relationship is established between the UK and EU. Both parties lose if there is no deal."

The OECD's last economic survey of the UK was in 2017. Its 2020 study on Brexit and the economic effects of COVID reveals the risk for the UK. With the feared resurgence of the virus and the effects of the lockdown restrictions in earlier quarters, the thinktank believes the GDP will fall by 10% by the end of the year.

Recovery is seen in 2021 at 7.6%. While the Office for Budget Responsibility predicts a record unemployment rate similar to that of the 1980s, the OECD is more hopeful.

Factoring in government interventions, including the furlough scheme, unemployment rates will only go up to 5.3% in 2020. According to thinktank, unemployment will rise to 7.1% in 2021. These rates are fairly less severe.