By Stephen Phillips

AMIDST all the current media and public focus on Covid-19, the issue of Brexit continues to lurk in the wings, like a restless lead actor in a Shakespearean drama awaiting their moment to reclaim centre stage. Indeed, one of the few positives to come from the coronavirus lockdown has been its effect on sidelining the UK’s withdrawal from the EU as part of our daily discourse.

This current respite is, however, set to come to an end soon. Both sides resumed talks last month and are now heading for what is likely to be a high-profile showdown on the issue of whether negotiating an agreement should be extended beyond the end of December. Well before the outbreak of the current global pandemic, the timescales for negotiating and implementing the Brexit agreement were already extremely ambitious. The imposition of Covid-19 lockdown measures and the self-isolation of key people from within the respective negotiating teams have made it an even greater challenge.

Worryingly for UK workers and businesses, now reeling from the impact of Covid-19, the resumption of negotiations has so far proven to be anything but positive. After getting talks back on track in April, EU chief negotiator Michel Barnier said progress had been “disappointing”, and even UK representatives admitted that only “limited progress” had been made. Last week EU Trade Commissioner Phil Hogan went further, saying he saw no sign from the UK Government that it wanted trade talks to succeed.

There are significant differences between the two sides on fisheries, competition rules, police co-operation, and on how a deal would be enforced, but at the heart of these gloomy assessments is the UK’s emphatic position that there will be no extension to talks beyond the end of the year, which significantly enhances the prospect of a No Deal Brexit.

No Deal represents a huge threat to the UK economy. Last year’s British Chambers of Commerce survey of businesses showed only four per cent would increase investment in the event of a No Deal Brexit while a quarter of companies said they would reduce investment. These views came before there was any notion of a coronavirus shutdown and the current economic impact it’s having on jobs and companies.

As things stand, a No Deal Brexit would result in the implementation of World Trade Organisation rules or, at best, be based around a last-minute free trade agreement which reduces or eliminates EU tariffs but would be very similar to a WTO trading relationship. In this event, many UK businesses will now find themselves in a weaker financial state with less capacity to deal with major changes to regulations and processes.

The Covid-19 crisis has also highlighted some potential dangers of a No Deal Brexit where global supply lines have been shown to be fragile in some sectors. The introduction of new EU trade barriers, regardless of whether these are tariff or non-tariff barriers, would likely cause further disruption in supply chains, such as food and drink, and raise costs for consumers.

This seemingly entrenched position of the UK Government and the fact that EU national governments are focused on battling Covid-19 create real concerns for our economy, which is under more stress than any other time in living memory. In times of crisis we need sensible and flexible leadership from both sides of Brexit negotiations if we are to avoid turning this into a fully blown economic disaster.

Stephen Phillips is a partner and member of the Brexit Group at CMS