It is no surprise to hear Boris Johnson, Britain’s instinctively optimistic prime minister, express hope that by next summer the United Kingdom “will be in a different world”. As the first country to launch a mass vaccination programme to help stop the spread of Covid-19, Britain has become the cheerleader-in-chief for a return to a more normal life. However, for the UK and for Johnson in particular, the stakes could not be higher. Britain is desperately trying to turn the tide against a resurgence of the virus that has forced the government to introduce a tougher system of regional restrictions that will last until the end of March. It is also engaged in a dangerous game of brinkmanship with the European Union over the terms of a trade deal that needs to be agreed in time for an end to the Brexit transition period on December 31. Yet, even if a vaccine rescues Britain from the pandemic and an 11th-hour trade agreement is struck in the coming days, the damage has already been done. Ever since Britain decided to vote to leave the EU in June 2016, the country’s governance, economic performance and reputation have suffered significantly. The debilitating uncertainty over the future relationship between Britain and its most important trading partner has cost the country dearly. Although predictions that a Leave vote itself would tip the UK into recession were wide of the mark, Britain went from being one of the fastest-growing economies in the Group of Seven in 2013-16 to one of the slowest in 2017-18, according to a report published by the International Monetary Fund in November 2018. Despite ultra-loose financial conditions, Brexit-related uncertainty has held back business investment. In financial markets, while sentiment towards the pound has been volatile, UK stocks have fallen sharply out of favour with institutional investors since the Brexit vote. According to Bank of America’s monthly fund manager survey, the UK remains the most unloved region among equity investors. Since the EU referendum, UK shares have risen just 7 per cent compared with a 51 per cent rise for global equities. Yet, the most visible damage is the weakening in Britain’s institutions and governance, a consequence of the populist, anti-establishment sentiment that has seeped into the ruling Conservative Party since 2016. A Trumpian assault on the civil service, judiciary and media, coupled with a hostile and dismissive attitude towards the business community, have severely undermined Britain’s reputation, particularly since it has been accompanied by incompetence and weak leadership . The pandemic has exposed many of these vulnerabilities. Johnson, who is not one for details and has admitted his “policy on cake is pro having it and pro eating it”, has dithered and defended the indefensible. He has delayed decisions on imposing national lockdowns when the virus was spreading rampantly and boasted about a “ world-beating ” test-and-trace system that remains a shambles. The result is that Britain has the highest number of deaths in Europe attributed to Covid-19 and the second-highest number of confirmed cases, according to Johns Hopkins University data. What is worse, despite spending more to combat the virus than almost any other major economy – Britain’s fiscal deficit is set to reach a staggering 16.7 per cent of output this year, up from 2.4 per cent in 2019 – the UK economy is forecast to shrink 11.2 per cent this year. That is the worst performance among the world’s leading economies, according to data from the Organisation for Economic Cooperation and Development. The botched handling of the pandemic has thrown the threats posed by Brexit into sharp relief. Regardless of whether Britain and the EU can secure an agreement on future trade relations, the deal Johnson is seeking – which would prevent tariffs being levied on trade in goods – would take Britain out of the bloc’s single market and customs union. This constitutes a harder Brexit than the one favoured by Johnson’s predecessor and a sharper rupture than that envisaged by leading Brexit supporters before the referendum. A no-deal Brexit would be catastrophic, mainly for Britain but also for the EU, whose ability to manage crises in the absence of a political and fiscal union would be further compromised. Yet, even the free trade deal on offer would lower the UK’s output by five percentage points across 15 years compared with EU membership, the government has conceded. The imposition of non-tariff, regulatory barriers will end frictionless trade. Companies doing business with the EU – which accounts for 43 per cent of Britain’s exports and 52 per cent of its imports – will be tied up in red tape. That Britain is still hell-bent on pursuing a hard Brexit – the hardest one of all, if necessary – in the face of the devastation wrought by Covid-19 speaks volumes about the political determination to reclaim sovereignty. While the EU might be underestimating the government’s desire to “get Brexit done”, Johnson is overestimating the ability of the UK to cope with the double whammy of a trade shock and a resurgence of the pandemic. Nicholas Spiro is a partner at Lauressa Advisory