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  1. Politics
  2. UK Politics
30 November 2020

Why a Covid-19 vaccine makes a Brexit deal more likely

The easing of the coronavirus crisis would make it harder for the government to disguise the economic pain of a no-deal Brexit.  

By Stephen Bush

Will a Brexit deal be done this week? It’s a question that can only be answered by answering another question, which can only be answered by the man himself: does Boris Johnson want to do a deal or not? 

This time last year, he did: partly because the deal that was on offer – a return to the European Union’s preferred solution of a customs and regulatory border in the Irish Sea – allowed Johnson’s preferred, significantly harder Brexit for England, Scotland and Wales to be realised. 

And there is, again, a deal to be done: it just involves a compromise on the level playing field provisions and on fishing rights. The latter is politically symbolic but close to meaningless from an economic perspective, the former is where the action is as far as the economics is concerned. 

[see also: How will Labour vote on a possible Brexit deal?]

The choice before the government on the level playing field is this: sign a trade deal where any divergence from the level playing field means tariffs on goods and services across the British economy. Or refuse to sign a trade deal and immediately have tariffs imposed on goods and services across the British economy. 

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A no-brainer, right? Well, yes and no. The crucial difference is that a no-deal Brexit means that the UK experiences the pain up front – and that the government has, in theory, three years to use the benefits of regulatory divergence to navigate the immediate crisis and get the electorate back on side and the economy fit and firing again. 

Of course, that theory falls down if, like me, you think the benefits of divergence will never outweigh the costs of greater trade barriers – but Johnson and his government disagree with that assessment.

[see also: “I’ve never relied on anyone in my life”: Covid-19 and the new Universal Credit claimants]

As we saw last week in Rishi Sunak’s spending review, while a no-deal Brexit makes the economic picture a good deal worse, the coronavirus recession means that politicians can get away without mentioning it. Yes, the economic cost of a no-deal Brexit is much higher than that of the coronavirus recession, but the juxtaposition of the two makes the politics easier to navigate. 

Think back to the 2008 financial crisis and the US Congress’ rejection of the Troubled Asset Relief Programme: it unquestionably made everything worse and caused additional hardship to households, but few people outside the worlds of politics and economics think of the failure of TARP as a discreet moment in the financial crisis. The same could be true for the coronavirus and no-deal economic shocks. 

And that’s why the news that the UK may be the first in the world to approve a new coronavirus vaccine may also increase Johnson’s appetite for a Brexit deal: because the coronavirus recession and a no-deal Brexit may no longer be one undistinguishable event, but two. 

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