Brexit: UK facing risk of ‘systemic economic crisis’ in 2021, leaked government document reveals

Boris Johnson’s government fears the possibility of a “systemic economic crisis” at the end of the Brexit transition period, a leaked document has revealed.

A confidential Cabinet Office briefing reportedly warns officials of the increased likelihood of major difficulties in the early months of 2021 – regardless of whether a UK-EU trade deal is struck.  

The briefing, details of which were published by The Guardian, warned of the “notable risk” of problems in exiting the single market while the country remains in the grip of the coronavirus pandemic.

The document drawn up in September incorporates some of assumptions made in last year’s “Operation Yellowhammer” plan for a no-deal scenario – but is said to offer even starker warnings because of the ongoing Covid-19 outbreak.  

Struggles with the supply of medicine is identified as a potential problem after the transition ends, with planners predicting “a reasonable worst case flow rate of 60-80% of current levels”.  

Although the government announced new ferry contracts in October to help supplies reach the UK, the briefing warns that both the “high degree of change” brought by Brexit and “significant winter resurgence” of Covid would have a damaging impact on the NHS and care sector.

“The pandemic has and will continue to limit the capacity of the health and care sector to prepare for and respond to the end of the transition period,” the document stated.  

It added that health and social care could see a “sustained level of system disruption” until at least April.

“Winter 2020 could see a combination of severe flooding, pandemic influenza, a novel emerging infectious disease and coordinated industrial action, against a backdrop of the end of the [Brexit] transition period,” the briefing also warned.

Officials also expect food supply chains to be hit by “circumstances occurring concurrently at the end of the year”, which could see a reduction in supply of some fresh produce, as well as pushing up prices.  

The Cabinet Office would not comment on the contents of the leaked briefing, but a spokesperson said “intensive planning” was under way to help the country adjust to the end of the transition period.

“As a responsible government we continue to make extensive preparations for a wide range of scenarios, including the reasonable worst case,” the spokesperson said. “This is not a forecast or prediction of what will happen but rather a stretching scenario. It reflects a responsible government ensuring we are ready for all eventualities.”

Cabinet Office minister Michael Gove said last month that the UK was “well prepared” for a no-deal scenario if a trade agreement could not be forged.

The Office for Budget Responsibility (OBR) is set to publish its own estimate of the economic impact of a no-deal Brexit later on Wednesday.

It follows a warning by the Bank of England’s governor Andrew Bailey that the long-term economic effects of a no-deal Brexit would be even more damaging than those of the coronavirus pandemic. “It would be better to have a trade deal,” he said.