Interplay between economic shocks of Brexit & Covid-19 has been underdiscussed IMHO. Some talk from Government about how C-19 economic impact makes Brexit irrelevant. Superficially, sounds like it might be right but is it? Yes and no, though mostly no. Thread explaining why 1/

First the Government argues many sectors will have to transform from Covid-19 impact & also from Brexit, so why do it twice rather than all in one go. Sounds logical but...2/

The sectors hit hardest by Covid-19 (travel, tourism, retail) are not the ones hit hardest by Brexit (chemicals, pharma, financial services). Having both at the same time actually unleashes two shocks which hit a wider range of sectors (plus hits manufacturing twice) 2/

Second, Govt argues supply chains are so disrupted so it makes little difference

1. Supply chains across UK/EU have held up pretty well
2. Type of disruption is different. C-19 led to temporary unpredictable disruption. Brexit means permanent increase in costs in supply chain 3/

Therefore rather than cancelling each other out, these additional costs within the supply chain will compound each other. While worrying about suppliers viability firms will also have a whole new bunch of admin/costs to deal with 4/

Third, Government argues the economy is going to be reshaped by Covid-19, especially supply chains. True but we don’t know exactly how and this will take time. It is unlikely to happen immediately and I doubt by end of the year. 5/

Furthermore, building in resilience & diversity in supply chains increases costs. As will additional admin & delays from Brexit. These push in the same direction. Yes, this might also lead to more on-shoring in UK, but it will increase costs for businesses and consumers 6/

Fourth, as this on-shoring begins globally, could see UK firms facing higher costs in terms of exporting elsewhere & reduction in access. Again, goes in the same direction as reduction in market access for biggest market in terms of the EU. Reducing opportunities for UK firms 7/

One area where the argument has merit is on the demand side. Any demand disruption expected from Brexit will have been massively overtaken and dwarfed by Covid-19. 8/

It is also true that businesses will have to & should consider the impact of the two together. Given there will be no extension the two shocks will run together & business need to prepare for both in the round 9/

I expect there is also a political argument that combined response to both requires expending less political capital & would have broad public support. The licence to do what is needed would be greater than a more discreet Brexit response 10/

Linked to that, it is also true to say that in general, steps taken to support business and preserve jobs under Covid-19 may also cut across and support jobs which might otherwise have been lost due to Brexit. 11/

But even here there is an important difference, the Covid-19 impact is likely to be temporary (at least until we know how it will reshape the economy more broadly) while Brexit is a permanent change from end of the year. 12/

So the Government should also take account of the changing economic landscape due to Brexit when considering interventions & the long terms viability of any firms/sectors it chooses to support. 13/

Overall, at the risk of oversimplifying, while the demand shock from Covid-19 overtakes that from Brexit, the supply shocks from both compound each other. It now seems (sadly) inevitable they will run together, we all need to prepare as such. 14/ ENDS