Press play to listen to this article
LONDON — Twelve months after embarking on a new life outside the European Union, the impact of the twin pressures of Brexit and the COVID-19 pandemic on British trade is becoming clearer.
While it is difficult to disentangle the effects of the two seismic events, it is clear that the UK performed worse than comparable EU economies, according to POLITICO’s analysis.
Despite signing a series of new trade deals since leaving the bloc, including so-called rollover deals that allowed trade with more than 60 signatory countries to continue on terms similar to those enjoyed by the UK when it was still a member of the EU, the impact of Brexit on UK supply chains was enormous.
Trade with the EU fell immediately at the end of the Brexit transition period in January 2021, with UK exports to EU countries down 45% on the previous month and imports from 33%. Imports from the EU are still below pre-pandemic levels, while 52% of all trade in the first 10 months of 2021 was with non-EU countries.
And it is clear that without EU membership, the UK trade picture will only change, as Britain has thrown its usual supply chains upside down. “British businesses don’t have markets that are now easy to trade in,” said trade expert David Henig, UK director of the European Center for International Political Economy.
While EU countries have largely recovered to pre-COVID levels of trade, the same cannot be said for the UK, where flows in Q3 2021 were the lowest value relative to GDP. observed since 2009.
“The most positive side of this is that there is a lot of transition effect as we get used to the news. The really negative part is that trade in the rest of Europe was increasing and not ours Henig said, “You can’t put a load of barriers up to 50% of your trade and not have an impact. There’s a fatality there.”
James Sibley, head of international affairs at the Federation of Small Businesses, said SMEs had “suffered disproportionately” from the effects of COVID-19 and Brexit. “We see in our data that the number of SMEs that have experienced declining trade volumes, disruptions or have just stopped exporting has been quite high and quite large,” he said.
“Faced with tougher trade with the EU, businesses will look to other options globally,” Henig said. “But it’s never going to be as easy as trading with the EU was, so it’s always going to be difficult.” Despite this, Henig predicted that trade with non-EU countries would be “no longer the area of growth”, while also predicting “a greater focus on services versus goods” in 2022.
In December, the UK signed a free trade agreement with Australia and reached an agreement in principle with New Zealand. Could this help offset the loss of EU trade? “[Trade deals] generally going to be positive for the economy, but only on a small scale, they’re not going to replace deep integration with your neighboring markets,” Henig said.
After the major disruption in 2021, Sibley predicted that some exporters will “overcome the challenges they faced last year”. However, challenges remain for smaller businesses less able to bear higher costs, and businesses face further disruption at home with new EU import controls now in place and more expected later. This year.
On a note of optimism, Sibley said there was an “appetite to explore new markets” among FSB members, with increased interest in the opportunities presented by FTAs with Australia and New Zealand. . “We see that coming to fruition, for sure,” he said.
The move away from the EU led the UK to import more goods from China than any other country in the third quarter of 2021, overtaking Germany. The trend has angered some Tory MPs, who have called on the UK to reassess its relationship with the Chinese Communist Party in light of its human rights record.
Iain Duncan Smith, the former leader of the Conservative Party, who was among those MPs sanctioned by the regime in March 2021, has said the UK’s economic ties to China are why Boris Johnson’s government has refused to declare the CCP crackdown on Uyghur Muslims in Xinjiang Province. genocide.
“The reason governments like the UK are dragging their feet in finding China guilty of genocide is written into these numbers,” he told POLITICO. “The nature of our trade with China and our blatant reliance on China, as these numbers demonstrate, shows very, very clearly that we are compromised in many ways by a brutal regime.”
Tory MP Alicia Kearns is co-chair of the China Research Group, made up of hawkish MPs over Britain’s relationship with the country. She said the government should follow Washington in imposing a ban on goods imported from Xinjiang that are made with forced labor. “British people don’t want to buy goods that make them complicit in genocide against Uyghurs or other minorities by the Chinese Communist Party, and we must do more to rid our country of the products of bloodwork.”
A UK Commerce Department spokesman said he expected 2022 to be a “five-star year” for the country’s trade push, amid negotiations with India, Mexico, Canada and the Gulf, as well as for membership in the CPTPP trading bloc.
“We have secured over £760 billion in trade deals with 70 countries plus the EU, and in the year ahead our independent trade strategy will ensure the UK continues to attract valuable financial investment. that boost our world-class exports and bring prosperity to every part of the UK helps level the country,” they added.