How UK trade is suffering after Brexit

The government insists the economic damage is temporary, but there are good reasons to think that isn’t the case

(AFP via Getty Images)

British exports to the EU plunged by more than 40 per cent in January – the first month since the Brexit transition period ended.

It was the biggest monthly decline in 20 years, and imports from the EU also fell by a significant amount – around 29 per cent.

The government has said to be careful interpreting the numbers. Brexit minister Lord Frost, who negotiated the deal, said a “unique combination of factors made it inevitable that we would see some unusual figures”.

It’s true that anticipating disruption, some firms will have stockpiled in December and are eating through that in January, meaning fewer shipments may have been required.

Coronavirus also likely depressed demand compared to the previous January, to which the figures are being compared.

So it’s won’t all be Brexit based, and it won’t be permanent. But there are good reasons to think there’s been some permanent damage done to the UK’s trade with the bloc.

The first is that coronavirus has depressed demand for a long time now, and the figures haven’t been this bad before. So that’s nothing new.

But overall, it is simply a fact that the government has spent the last few years painstakingly erecting trade barriers with its largest neighbour that are making it harder to do business.

And it isn’t always a case of trade finding a way. The point about international commerce is that it is competitive, and putting UK firms at a disadvantage just means that consumers and businesses in the EU will buy from elsewhere in the single market.

One practical example of this is in exports of food and live animals, including seafood and fish. This sector was the hardest hit, with exports from the UK falling 63.6 per cent in January compared to last year.

The problems that Brexit is causing for these industries are well-documented: extra bureaucracy like catch certificates and export declarations are making British shipments of fresh seafood uncompetitive to their main export markets on the continent and some companies have said they will have to cease trading.

Even if British companies eventually manage to work out a reasonable system for dealing with the bureaucracy as a matter of course, the simple fact that their shipments are less reliable than those from other EU countries will count against them and cost them customers.

These agricultural and fishing exports are a very small part of UK trade, but this situation is simply a more intense version of what is happening in other industries that are losing out to continental competitors in EU markets.

The government argues that the damage caused by Brexit is worth it because it will allow the UK to trade with the rest of the world. There is no sign of this being true now: the Office for National Statistics says a 1.7 per cent rise in non-EU trade, worth just £200m, comes nowhere near to making up for the massive £5.6bn fall in UK exports to the EU or £6.6bn fall in imports from the EU.

There’s also no sign of this changing in the future. Despite all the noise around trade deals with the rest of the world, the government’s own projections suggest they will have almost no benefit to the economy overall.

The largest deal, with the US, is predicted to have a 0.16 per cent boost to GDP over the next 15 years, according to the Department for International trade. Unless something changes, it will be difficult for Boris Johnson to argue his project has been anything but damaging in economic terms.