LONDON — The blow to the U.K. of failing to reach a trade deal with the European Union would be more costly than dealing with the coronavirus, Goldman Sachs economists have warned.
In fact, the investment bank said the fallout of a no-deal outcome was likely to be “two to three times larger” than that of “the worst pandemic witnessed in post-war history.”
The U.K. government has over the last week challenged previous commitments with the European Union, increasing the odds that both sides will not manage to put a trade agreement together before the end of the year. This “no-deal” outcome would result in higher costs for exporters on both sides.
Some analysts have suggested that these costs would blend in with the hit to the U.K. economy from the global pandemic, making it difficult to determine what will be the real source of economic pain in the years to come. However, Goldman Sachs economists disagree.
“We are sceptical of the argument that the sheer scale of the economic fallout from Covid-19 will obscure the economic impact from a breakdown in Brexit negotiations,” they said in a research note Monday.
The investment bank argued that the industries hit hardest by the coronavirus — such as recreational, food and drink, and wholesale businesses — are different from the sectors mostly likely to be punished by the U.K.’s departure from the European Union, which include chemicals, textiles and electrical equipment businesses.
A no-deal Brexit would be more costly for the UK than coronavirus, Goldman says – CNBC