Bthe rexit begins to take its toll. Trade with the EU is suffering and foreign investment is heading south. Neither of these trends is temporary and both undermine the government’s stated goal of “leveling up” regions that have hitherto depended on foreign trade to create well-paying jobs.
It is not clear if the red wall noticed it. Or anyone of the 17.4 million people who voted for Brexit. So far, all in-depth polls show little movement on the contentious issue of EU membership.
Those who called for a popular vote to overturn the referendum still want to be inside the union. On the other hand, Brexiters remain largely convinced that independence from EU courts and control of UK borders is worth any short-term damage caused by the evacuation of our headquarters in Brussels.
For a time, it was unclear how much the pandemic was complicating the picture. Those who campaigned for Britain to leave the single market and customs union were able to hide behind wider figures that showed global trade was taking a hit – and, since January, when the transition period ended ended, how the second and third waves of the virus had distorted the trade patterns of most exporting countries.
This is no longer true. Too many independent reports looking at UK trade figures come to the same conclusion: Brexit is bad for exporters. And not just today and tomorrow, but for a very long time.
At first glance, analysis of the most recent data suggests that the impact of Brexit has been relatively small. In May, the UK recorded a trade surplus for the first time since June 2020, and exports of goods to the EU were almost back to pre-Covid levels.
But a closer look by consultancy Pantheon Macroeconomics found “the damage is more apparent and Brexit appears to be preventing the UK from fully benefiting from the global trade recovery”. As a percentage of total EU imports, the ONS’s measure of the UK’s share is below its 2019 average level. “In other words, UK exporters have lost market share”, says Pantheon.
Commodities most sensitive to new trade barriers, such as food and chemicals, fared particularly badly, he says. More importantly, services sector exports were still 18% below their pre-Covid level in May, with exports to the EU in particular weighing on the overall figures.
Businesses in the northeast are already nursing their wounds, as the local Chamber of Commerce highlighted last week in an open letter to Boris Johnson. A May survey of its ‘international trade members’ found that 75% said their finances were affected by Brexit red tape, while 37.5% said their trade volumes between the UK United and EU had suffered.
James Ramsbotham, chief executive of the chamber of commerce, said Johnson needed to understand that Britain’s ‘new power to deviate from European standards may come at a cost’ and would be borne most heavily by the northeast, which is “the region most dependent on European trade”.
William Bain, head of trade policy at the British Chambers of Commerce, has drawn up a table of 1,400 barriers trade with the EU which he says will make life difficult for even the most dedicated and enterprising exporter.
Each EU country is allowed to impose its own rules on foreign companies in addition to those set by Brussels. There are licenses to apply for, prohibitions on buying goods and expensive visa requirements. These are all common barriers that UK workers and businesses have to overcome in order to work and provide services in a Member State.
If these stories of struggling exporters don’t convince skeptics, there are regular updates from consultancy EY on the level of business investment in the UK from overseas.
Some investments by foreign companies remained stable or increased. For example, food manufacturing has eaten up foreign money, growing from 35 foreign-funded projects in 2015 to 64 in 2020, and our passion for internet shopping and delivery means foreign-funded logistics projects abroad rose from 71 to 94 during this period.
However, while the UK held nearly 13% of all European foreign direct investment (FDI) in manufacturing in 2015, that figure has now fallen to just over 8%, and automotive investment and transport fell from 83 to 40 projects in the same five years. until 2020. These investments once placed the UK at the heart of a network of European factories. Not anymore.
When exports account for 30% of UK GDP and UK-based exporters struggle to make headway in a world of booming trade, it doesn’t bode well for the country’s economic health over the next year and many more to come.