Brexit has cracked Britain’s economic foundations


It has been two years since former Prime Minister Boris Johnson signed his Brexit trade deal and triumphantly declared that Britain would be “prosperous, dynamic and satisfied” after leaving the EU.

According to Johnson, a Brexit deal will enable UK companies to “do even more business” with the EU, and Britain will be able to negotiate trade deals around the world while continuing to export uninterrupted to the EU market of 450 million consumers. Will leave free for.

Indeed, Brexit has affected the UK economy, which remains the only member of the G7 – a group of advanced economies that also includes Canada, France, Germany, Italy, Japan and the United States – whose economy is larger than before. Was small Epidemic.

Years of uncertainty over future trading ties with Britain’s biggest trading partner, the European Union, have hurt business investment, which in the third quarter was near the pre-pandemic level despite the UK-EU trade deal being in place for nearly two years. 8% below the level of ,

And the pound has taken a beating, making imports more expensive and stalling inflation while failing to boost exports, even as post-pandemic trade booms in other parts of the world.

Brexit has raised trade barriers for UK businesses and foreign companies that used Britain as a European base. This is putting a burden on imports and exports, reducing investment and contributing to labor shortages. All of this has added to Britain’s inflation problem, hurting workers and the business community.

Co-director of the Center for Inclusive Trade Policy at the University of Sussex, L. According to Alan Winters, “the most plausible reason why Britain is doing comparatively worse than comparable countries is Brexit.”

A sense of gloom hanging over the UK economy has been captured by striking workers, who are walking out in large numbers over pay and conditions as the worst inflation in decades eats into their wages. Also, the government is cutting spending and raising taxes to fill the gap in its budget.

While Brexit is not the cause of Britain’s cost-of-living crisis, it has made the problem more difficult to solve.

Michael Saunders, a senior adviser at Oxford Economics and former Bank of England official, said, “The UK chose Brexit in a referendum, but the government then chose a particularly hard form of Brexit, which maximized the economic cost.” Gave.” “Any hope of an economic boom from Brexit has been largely extinguished.”

Also Read :  Tax & Spend: Ottawa’s bargaining with CRA employees could start a wage-spiral spinning

NHS nurses strike over pay outside St Thomas' Hospital in London on December 20, 2022.

Although Britain voted to leave the European Union in June 2016, the exit from the Single Market and Customs Union was only finalized on December 24, 2020, when the two sides finally agreed on a free trade agreement .

The Brexit deal, known as the Trade and Cooperation Agreement, comes into force on January 1, 2021.

It eliminated tariffs on most goods, but introduced a raft of non-tariff barriers, such as border controls, customs checks, import duties, and health inspections on plant and animal products.

Before Brexit, a farmer in Kent could send a truckload of potatoes to Paris just as easily as they could to London. Those days are no more.

Michelle Owens, founder of Small Business UK, said, “We hear stories from small businesses every day about nightmares of forms, transport, couriers, things… the epic length of the problems is just awe-inspiring.” , a campaign group.

“The way things have unfolded over the last two years, it’s been really bad for small businesses,” Owens told CNN.

Researchers at the London School of Economics estimate that the variety of UK products exported to the EU fell by 30% during the first year after Brexit. He said this was likely because smaller exporters were forced out of smaller EU markets.

Take the example of Little Star, a UK-based company that makes jewelry for children. Its business started in the Netherlands with further plans to expand to France and Germany. But since Brexit, only two of its more than 30 Dutch customers have been willing to handle the costs and paperwork to receive stock from the company.

According to Rob Walker, who co-founded the business with his wife Vicky in 2017, products that used to take two days to ship are now taking three weeks, while import duties and sales taxes have made competition with European jewelers difficult. Made it very difficult to do. The company is now looking to the United States for growth opportunities.

“Isn’t it crazy that we have to look on the other side of the Atlantic to do business, because it’s so difficult to do business with people 30 miles away?” Walker said.

Also Read :  Surrey Mayor Doug McCallum said large German medical company bringing 1,000 jobs to Surrey – North Delta Reporter

A truck passes the Union Jack at the Port of Dover on April 1, 2021.  The UK government has delayed post-Brexit checks on EU food imports until the end of 2023.

A British Chambers of Commerce survey of more than 1,168 businesses published this month reported that 77% said Brexit had not helped them increase sales or grow their business. More than half said they are having difficulty adapting to the new rules for trading in commodities.

Siterite Construction Supply, a manufacturer in Dorset, told the chamber that importing parts from the EU to fix broken machines has become an expensive and “time-consuming nightmare”.

According to Sightrite, “Brexit is the biggest imposition of bureaucracy ever on business.”

Nova Dog Chews, a maker of dog snacks, is set to lose all its EU business after it said it has not established a foothold in the bloc. It added, ‘This has cost our business huge sums of money which could have been invested in the UK, if it were not for Brexit.’

A UK government spokesman told CNN that the government’s Export Support Service has provided exporters with “practical support” on the implementation of the Brexit deal. The deal is “the world’s largest zero-tariff, zero-quota free trade deal,” the spokesperson said. “It secures UK market access in key service sectors and opens up new opportunities for UK businesses around the world.”

Britain will not be able to easily make up for what it has lost by ending free access to the world’s largest trading bloc.

The only concrete new trade deals that have happened since leaving the EU, which didn’t simply roll over the deals made as an EU member, have been with Australia and New Zealand. According to the government’s own estimates, these would have a negligible impact on the UK economy, increasing GDP by only 0.1% and 0.03% respectively in the long term.

In contrast, the UK Office for Budget Responsibility, which produces economic forecasts for the government, expects Brexit to reduce UK output by 4% over 15 years, compared with remaining in the bloc. Exports and imports are estimated to be down about 15% in the long run.

This has been confirmed by preliminary data. According to the OBR, in the fourth quarter of 2021, UK goods exports to the EU were down 9% from 2019 levels, with imports from the EU down 18%. Goods exports to non-EU countries were 18% weaker than in 2019.

Also Read :  Artists Sue Trax Record Label Over Years of Bad Business – Fraud, Unpaid Royalties, Copyright Infringement

“The United Kingdom has become a less trade-intensive economy,” the OBR said in a March report, falling 12% as a share of GDP since 2019, more than any other G7 country. Two and a half times more.”

According to Jun Du, professor of economics at Aston University in Birmingham, the fall in exports to non-EU countries could be a sign that UK businesses have become less competitive as they struggle with higher supply chain costs after Brexit. have been

“The UK’s ability to trade has been permanently damaged [by Brexit]”Du told CNN. “That doesn’t mean it can’t recover, but it’s several years behind schedule.”

Research by the Center for European Reform, a think tank, estimates that in the 18 months to June 2022, UK goods trade is 7% lower than it would have been had the UK remained in the EU.

Investment is down 11% and GDP is down 5.5%, causing the economy to lose £40 billion ($48.4 billion) in annual tax revenue. That’s enough to pay for three quarters of the spending cuts and tax hikes that UK Finance Minister Jeremy Hunt announced in November.

The United Kingdom is projected to be one of the worst performing economies next year among developed countries.

The Organization for Economic Co-operation and Development expects the UK economy to shrink only 0.4% from sanctions-hit Russia. GDP in Germany is estimated to be 0.3% smaller.

The International Monetary Fund has forecast growth of just 0.3% for Britain’s GDP next year, ahead of only Germany, Italy and Russia, which are expected to contract.

Both institutions say that high inflation and rising interest rates will put a strain on spending by consumers and businesses in the UK.

According to the Confederation of British Industry, a leading business group, the decline in private sector activity accelerated in December and has now declined for five consecutive quarters.

The downward trend “is set to deepen” in 2023, Martin Sartorius, the CBI’s chief economist, said in a statement.

“Businesses are facing a number of headwinds, with rising costs, labor shortages, and weak demand contributing to a gloomy outlook for next year.”

— Julia Horowitz contributed to this report.


Leave a Reply

Your email address will not be published.