UK simply cannot afford a no-deal Brexit – leader comment

The UK economy is set to shink by more than 11 per cent this year, while the Government now owes a sum greater than the country’s GDP. Allowing a no-deal Brexit would be an act of utmost folly.
Boris Johnson must change course to avoid a no-deal Brexit (Picture: Jessica Taylor/UK Parliament/AFP via Getty Images)Boris Johnson must change course to avoid a no-deal Brexit (Picture: Jessica Taylor/UK Parliament/AFP via Getty Images)
Boris Johnson must change course to avoid a no-deal Brexit (Picture: Jessica Taylor/UK Parliament/AFP via Getty Images)

It is a figure to make anyone with an understanding of the importance of sound finances take a moment to reflect. Total UK Government debt is now £1.95 trillion, higher than the entire country’s gross domestic product (GDP). The last time it was so high was in 1963 as Britain gradually paid off the enormous sums borrowed during the Second World War.

Chancellor Rishi Sunak said the figures showed just how seriously the coronavirus outbreak has affected public finances, stressing the need to restore them to a “more sustainable footing” by “safely reopen our economy”.

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This will need to be done, and soon, because the current rate of borrowing is clearly unsustainable. The current furlough scheme, in which the Government pays 80 per cent of the wages of employees unable to work, is due to be gradually reduced and stop by the end of October as the tap is slowly turned off.

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However, the hardest-hit sectors, particularly tourism and hospitality industries, have a strong case to make for significant state support to continue, in some way, after this date. Both the UK and Scottish governments will have some extremely tough decisions to make in the coming months. Will they choose to add to the vast debt pile or let companies go under, with the associated loss of jobs and tax revenues?

Striking precisely the right balance between these two choices will be almost impossible and our politicians are going to need all the help they can get. But, even if they do make the wisest decisions, Britain is heading for hard times, with the OECD forecasting our economy will shrink by 11.5 per cent this year, a greater fall than any other developed country.

The full economic effects of the pandemic have yet to be felt, largely because of the current vast government spending. And the same can be said of the UK’s looming departure from the European Union, as we are, until the end of this year, still in the transition period so trade has not yet been affected.

But, unless Boris Johnson changes his mind, the UK appears set for a no-deal Brexit, which could be as big a blow to the economy as the 2008 financial crash. We simply cannot afford this to happen and must either strike a deal with the EU or ask for an extension.

Covid has left the UK in an unsustainable position – a deep economic hole, staring up at a massive debt mountain. We have no choice but to stop digging.

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