Is the supply crisis caused by Brexit or by the Covid pandemic?

As the pandemic recedes and a fuel crisis and potential energy crisis are becoming realities are the real costs of Brexit becoming more visible?

(AFP via Getty Images)

A supply shortage has been making the headlines for weeks now and there seems to no change on the horizon as the country battles a fuel crisis thanks to a shortage of HGV drivers.

It comes as Britain’s mounting fuel crisis which has seen pumps run dry being labelled as a “direct consequence” of Brexit, by the EU’s former chief negotiator Michel Barnier.

Mr Barnier, who is running for the French presidency, said the drastic shortage of lorry drivers and ongoing supply chain problems were down to the UK’s decision to quit the EU.

The fuel supply issues comes only weeks after Ikea, the furniture company that also sells meatballs, has apologised for shortages of about 10 per cent of its products, and the company in the UK said that they were caused by “disruption of global trade flows and a shortage of drivers, which have been exacerbated by the pandemic and Brexit”.

However, Ikea in the Netherlands, where shortages are also affecting about 10 per cent of its stock, offered a slightly different explanation: the “economic recovery from the coronavirus pandemic is proceeding faster than expected” and there is “congestion in ports” because “Chinese terminals were temporarily closed due to local coronavirus outbreaks”.

Obviously, there was no mention of Brexit in that statement, because the Netherlands remains in the EU. The different explanations were spotted by the Guido Fawkes website, which is pro-Brexit, but that does not mean that it is wrong to point out the inconsistency.

The problem is that the causes of shortages – in the UK and elsewhere – are complicated, and so when they started, people gave several explanations, which in the UK often included Brexit.

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In some specific cases, this was indisputable. There are some goods coming to the UK from the EU which are now subject to tariffs because of the “rule of origin”. Although the post-Brexit trade deal allows EU goods to come to the UK tariff-free, anything which was originally made outside the EU is now subject to customs duties.

Obviously, there was no mention of Brexit in that statement, because the Netherlands remains in the EU. The different explanations were spotted by the Guido Fawkes website, which is pro-Brexit, but that does not mean that it is wrong to point out the inconsistency.

But quite often problems have been caused by labour shortages. Pubs and restaurants cannot find staff, and their owners often say that their EU workers went home after Brexit. This is true, but it is probably not mostly because of Brexit. Many central European workers went back to their home countries during the coronavirus lockdowns, because their jobs disappeared and they wanted to be at home for the crisis.

Because the UK left the EU at the end of January 2020 and the virus struck a month later, it was easy to conflate the two events – although the Brexit transition period didn’t end until 1 January this year, which is when its effects were really felt. Before then there was no change in the status of EU citizens in the UK – and indeed since then any of them who are working here were entitled to continue to do so. The only difference on 1 February 2020 was that EU citizens may have felt less welcome in the UK, as they were now in a non-EU country, but this is unlikely to have had a significant effect.

The same confusion has beset the debate about the shortage of lorry drivers, which has had knock-on effects in causing shortages of everything from milkshakes to medical equipment. A few drivers might have turned down jobs travelling between the UK and the EU because of the extra paperwork, but one of the more important causes was that “EU workers went home” – after Brexit, but because of the pandemic.

There were other specific causes of the lorry driver shortage: a change in their tax treatment made the pay less attractive; and there were delays in issuing HGV licences – again caused by the pandemic.

The conventional view of almost all economists is that Brexit will have damaging effects on the British economy in the long term – if you make trade more difficult with your biggest market, you make it less profitable. In normal times, the British economy will continue to grow, but slightly less fast than it would have done otherwise. The period since we left the EU has been far from normal, however, and the economic disruption of behaviour changes and lockdowns since then has been huge the world over.

Most economists say that the current shortages are overwhelmingly caused by the coronavirus disruption, and that it is hard to separate out the minor contribution made so far by our leaving the EU.

The trouble with analysing this subject is that partisan biases are strong. Dedicated Remainers blame everything bad on Brexit if any remotely plausible connection can be made. Convinced Leavers, on the other hand, switch effortlessly from suggesting that there is no proof that Brexit so far has had any effect at all to claiming that it is pushing up wages for unskilled labour – and that this is a good thing.

In an attempt to cut through the bias, The Independent is holding an online event on 6 October to explore the hidden costs of Brexit and do what we can to tease out the Brexit and pandemic effects on the economy. I shall be chairing a panel of experts who will try to shed more light than heat on this complicated question. The event is free, so do register at the link below.