A year in Brexit renders UK uncompetitive in Europe
By Jeph Ajobaju, Chief Copy Editor
Boris Johnson is on the ropes and his political adversaries are counting down his days in Downing Street sequel to scandals he inflicted on himself that have weakened his position as British Prime Minister.
Sleaze and corruption charges have dogged him since he got the job in a landslide general election in December 2019 on the strength of his pledge to ‘get Brexit done’.
But the most perilous scandals are the series of parties held in Downing Street between May and December 2020 in violation of pandemic lockdown rules. He admitted in Parliament last week that he participated in at least one party and apologised.
Most of the United Kingdom, including his Conservative Party voters, are shocked that he made rules for citizens which he and his staff did not obey.
Sue Gray, a senior civil servant and a no-nonsense woman, is investigating the partygate with a report expected in the coming weeks.
“Although the remit of the Gray inquiry is limited, the findings could still prove irreparable for Mr Johnson.
“If Ms Gray finds that Mr Johnson knew the alleged parties took place, breaching guidance, his position could become untenable,” writes Sky News.
Even before partygate, Brexit had been a wrecking ball on the economy and society as a whole, hitting trade and movement, to the groan of British business, rights groups, and individuals.
Johnson did ‘get Brexit done’ by getting the UK out of the European Union finally on 31 December 2020 after a transition period that lasted a year.
But he lied during the Brexit referendum campaign in 2016, falsely claiming in bold letters on his campaign bus that the UK sent £350 million to the EU every week.
The lie came out after the ballot. It had, however, swayed the result. Leave got 52 of the vote, Remain 48 per cent.
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42% of Leave voters now have a negative view of Brexit
The Guardian (UK) reports below how both the Leavers and Remainers camps now feel about Brexit:
More than six out of 10 voters believe Brexit has either gone badly or worse than they expected – a year after the UK left the EU, according to an anniversary poll for the Observer.
The Opinium survey – coming a week after the minister in charge of Brexit, Lord Frost, resigned from Boris Johnson’s government – also found that 42 per cent of people who voted Leave in 2016 had a negative view of how Brexit had turned out so far.
26 per cent of Leave supporters said it had gone worse than they expected, while 16 per cent of those who voted for Brexit said they had expected it to go badly and had been proved right.
Among people who voted Remain, 86 per cent said it had gone badly or worse than they expected. Overall, just 14 per cent of all voters said Brexit had gone better than expected.
Remainers united, Leavers split
Adam Drummond, of Opinium, said the most striking finding was that Leavers were now more hesitant about the virtues of Brexit than previously.
“For most of the Brexit process any time you’d ask a question that could be boiled down to ‘is Brexit good or bad?’ you’d have all of the Remainers saying ‘bad’ and all of the Leavers saying ‘good’ and these would cancel each other out,” he said.
“Now what we’re seeing is a significant minority of Leavers saying that things are going badly or at least worse than they expected. While 59 per cent of Remain voters said, ‘I expected it to go badly and think it has’, only 17 per cent of Leave voters said, ‘I expected it to go well and think it has’.
“Only 7 per cent of Remainers think Brexit has gone better than expected versus 26 per cent of Leavers saying it has gone worse than expected.
“So instead of two uniformly opposing blocs, the Remain bloc are still mostly united on Brexit being bad while the Leave bloc are a bit more split.”
The poll came ahead of the introduction on 1 January of full customs checks on goods being exported from the EU to the UK, which business leaders believe could deter some smaller operators – such as food exporters – from supplying UK retailers as their costs and paperwork increase.
These will be followed by more checks on food imports from mid-summer.
Barriers to deliveries
Shane Brennan, chief executive of the Cold Chain Federation, said he expected many of the problems faced over the past year by small UK businesses exporting to the EU, particularly the rising cost of sending small amounts because of new charges, would now confront those sending small specialist consignments the other way, from the EU to the UK.
He warned that this could lead to less availability of specialist food products from the continent arriving in UK shops.
“Small traders have a choice, find a way to send more less often, or don’t send it at all,” Brennan said.
“For lots of businesses you can’t justify sending a lorry load of fresh food a day or week and so you won’t do it. The net result is less variety, less fresh, quality specialist goods on the shelf, from outside the UK anyway.”
His fears were echoed by Dominic Goudie, head of international trade at the Food and Drink Federation, who said: “As new trade barriers are introduced, it is inevitable that businesses will experience issues at the border.
“In some cases, this could result in significant barriers that risk blocking deliveries from EU suppliers altogether, at least temporarily, while businesses adjust to the new requirements or restructure their supply chains.
“For just-in-time supply chains, this presents a real risk which could disrupt the operation of UK supply chains where a critically important ingredient is delayed or fails to arrive.
“Such delays could also lead to other ingredients already at factories being unusable.”
UK uncompetitive in Europe
The economic impact of Brexit on UK after one year in operation is articulated below by BBC economics editor Faisal Islam:
A dozen mild-mannered small business owners pop up on my screen from sectors ranging from chemicals, to financial services, to aerospace, catering and small gift box providers.
Having been shown the data from a British Chambers of Commerce survey of the impact of Brexit’s first year I asked to chat to some of them to find out more.
The business owners I spoke to have pretty much the same reflection on different aspects of the reality of one year of trading outside the Single Market and Customs Union.
It’s clearly been challenging: “Frustrating. Scary. Huge drop in sales. Rendered uncompetitive in Europe.”
When I put to them what ministers have suggested privately – that some sections of British business need to be as prepared as the best-prepared bigger businesses, it got a little testy.
“I found it astounding that they are telling us to get used to it,” said Adrian Hanrahan, of Robinson’s chemicals, who is dealing with a new set of UK regulations entirely duplicating EU requirements.
A gift box distributor, Karen Lowen, says it’s cheaper for her to supply the US and Australia than Europe.
Meanwhile, a manufacturer of cutting edge green radiators says the expansion of his factory in Birmingham will now take place in Poland. One participant’s voice cracks as he tells me they are fighting to survive after a century-and-a-half in business.
A year on from the signing of the UK-EU Trade and Cooperation Agreement – the real economic start of Brexit – we can start to see some of the changes in how Britain trades.
Despite the overwhelming influence of the lockdowns, and post-pandemic bounce back on all aspects of the economy, it is possible in the data and in the direct experience of hundreds of businesses, to see the impact of Brexit.
In broad terms, this is what the numbers show, so far:
- Great Britain avoided the “reasonable worst case scenarios” of a stop to cross channel trade with massive social and economic challenges
- There was a significant material hit to trade both ways, especially in the first two months
- From those lows, UK exports recovered in later months, but not fully and some sectors such as clothing and food are still struggling
- Total UK-EU trade (both ways) missed out on a global rebound in trade in 2021, and remained at the very low levels of the 2020 pandemic
- Trade with the Republic of Ireland has slumped from Great Britain, boomed from Northern Ireland
UK economy less open, less global
After a year of Brexit, the UK economy appears to be less open or less global than it was before.
The government’s official forecasters, the Office of Budget Responsibility, said the latest actual data were consistent with its forecasts from five years ago that the “trade intensity” of the UK economy could fall by 15 per cent over a decade and a half.
The UK’s key export markets are less reliant on UK goods, and the UK is less reliant on foreign goods. This is at a time when trade elsewhere in the world boomed, recovering all the losses and more in the pandemic slump.
From January-October 2021 there was $627 billion in two-way trade between the US and the European Union, up from $532 billion in the same months in 2020, a bounce back of 18 per cent.
China-EU two way trade in the first 10 months of 2021 was €558 billion compared to €479 billion in 2020, a bounce back of 17 per cent.
The equivalent figure for the UK’s two way trade with the EU is 2 per cent growth or £308 billion versus £302 billion.
In other words, UK-EU trade has in this first year of the post Brexit trade deal, failed to rebound unlike most of the rest of world trade.
In January, Charlie Samway, of Samways fish merchants in Bridport, Dorset, took the trouble to show me through 76 pages of documents now required alongside a visit and stamp from a vet with his consignments of exported monkfish and cuttlefish.
Whilst frustration at the red tape and risks to deliveries remain, he said: “Things have massively improved, from where we were there at the start of the year.
“So on the whole, we’re much happier than where we were, but I don’t think to say that things are perfect, I don’t think they’ll ever be, it is potentially something we’ve got to live with.”
Surprising
In the car industry there was good news in the UK. The long delayed wave of investment into electric vehicles has started, beginning with Nissan recommitting to its Sunderland site.
This follows not just the zero tariff deal, but also the last minute commitments negotiated by the prime minister with the EU to allow the deal to apply for a few years to cars with lots of imported technology from Japan, Korea or the US.
But, in general, annual trade volumes since the Brexit deal are down on any definition of pre-pandemic normal. What is also true is that while the first few weeks of the year saw a terrible drop, the feared catastrophic worst case scenarios thankfully did not materialise.
Experts tend to prefer to compare 2021 performance with one of the years before the pandemic, such as 2019.
On that basis UK exports to the EU in the first ten months of 2021 were down 12 per cent on pre-pandemic levels. UK imports from the EU were down more -20 per cent lower than before the pandemic.
This is surprising, because the new checks instigated were mainly enforced on exports going to the EU, and not on imports coming into the UK.
Trade with the rest of the world – the “non-EU” countries – is also down both ways since 2019, though by less.
UK exports to the rest of the world are down 7 per cent, or £12 billion in January-to-October 2021 versus the same in 2019. UK imports in the same time periods have fallen a little too by 3 per cent to £227 billion.
Political reality
So the really big mystery is why EU imports into the UK have fallen more than the other way around. Partly it’s a result of the general post pandemic fall in vehicle sales, down £14 billion or 30 per cent in the first 10 months of 2021 versus 2019.
Interestingly non-EU imports are up 16 per cent over the same time period, and part of that is down to Tesla cars imported from the US and China.
Aircraft, electrical devices, pharmaceuticals, steel and nuclear technology all saw multi-billion falls in EU imports into the UK.
With all of these numbers, it is worth mentioning that there may be an impact from re-classification of Irish trade, and the fact that data in previous years reflects despatch of goods within the EU with little paperwork, and is now classed as international trade.
One interesting ask from the Chambers of Commerce calls was merely for the UK government and the EU to calm down the rhetoric and stop acting like they are fighting.
That backdrop sends a message that it is risky to trade with Britain, especially with smaller British businesses, said some participants.
The question is whether the government is willing to do anything. One Cabinet minister said to me, businesses need to come to terms with “the fact that there is a customs border now” with the EU.
The political reality right now is that businesses’ worries are seen as manageable enough weighed against the freedom to regulate as the government sees fit.
