The London School of Economics (LSE) released a report on Wednesday which highlights that Brexit will affect parts of the UK economy that escaped relatively unscathed from COVID-19, like professional services and the pharmaceutical sector.

According to the report, the sectors of the economy that COVID hit hardest are those that involve significant physical interaction among people, such as travel, hospitality and all areas of entertainment. These will be less affected by Brexit.

However, sectors of the economy that were able to work remotely through COVID, such as professional services, banking, accountancy and technology, will all be hit by Brexit. Many of these, especially banking and pharma, will have the issue of regulatory standards once the UK ceases to be linked with the EU, while all sectors involved in trade with the EU will have to reintroduce customs documentation and the food sector will have health certification requirements.

Impact on supply chains

This will negatively affect supply chains that involve sectors such as car manufacture, where component parts are assembled in the UK but sourced from across the EU. Within the UK there is also the reality that trade to Northern Ireland will now have to go through an EU border inspection post to avoid having this in place at the actual border between Northern Ireland and the Republic of Ireland.

Negotiations

Meanwhile, the fifth week of intensive EU-UK talks conclude this week with a final round scheduled for the middle of August. At the end of that it should be clear if there is any basis for an agreement or if there will be a move to trade without any agreement and under WTO rules.

The mood music from talks has been poor, with the issue of fishing and UK adherence to EU standards being the issue. As it stands, Brexit will at a minimum impose an administrative cost on trade between the EU and UK. If there is no deal at all, then tariffs will have to be paid as well, which would make exports from Ireland to the UK impossible due to cost.

Minimum deal

The thinking is that some sort of minimum no-tariff, no-quota deal may emerge. This would allow business continue but if the UK in such a deal retains the flexibility to make its own independent trade deals, that is not good news for either Irish or UK farmers. Two of the most likely early deals will be with Australia and New Zealand and, as the UK negotiating strategy highlights, these will see an increase in imports of 80% and 40% respectively, with beef and sheepmeat the main categories to increase.

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