After a year, Brexit has hit the economy and business

In the months after Boris Johnson signed the post-Brexit trade deal with the European Union, the coronavirus masked the economic damage that leaving the bloc meant. As the pandemic drags on, the cost becomes clearer and voters are taking notice.

Brexit has been a drag on growth. It brought with it new red tape for trade between Britain and its largest and closest market, and it removed from the country a large amount of the EU workforce, on which many companies had come to depend. The combination has exacerbated supply chain shortages, fueled inflation and hampered trade.

The prime minister hailed the signing of the trade deal almost a year ago as the time when Britain regained control of its destiny. If it was, voters seem increasingly unhappy with the outcome. According to a November poll by Savanta Comres, the majority of the British population would now vote in favor of rejoining the EU, including one in ten who voted to leave the bloc in the 2016 referendum. June, only 49% wanted to reverse Brexit.

A few days ago, David Frost, Johnson’s key partner in the EU withdrawal negotiation, resigned and became the third Brexit minister to resign. In his resignation letter, Frost urged Johnson to use Brexit to turn the UK into a “low-tax, lightly regulated corporate economy”, but expressed dismay at the prime minister’s direction of the process, a sign of that Brexit is disappointing those who saw it as a once-in-a-generation opportunity to restore government regulation.

Commerce

Britain’s trade with the EU has declined since the country left the bloc and businesses were hit by new customs procedures and controls.

In October, the UK’s trade in goods with the EU was 15.7% lower than it would have been if Britain had remained in the single market and the EU customs union, modeled on the Center for Reform. Europea, an independent expert group. That compares with a 2018 UK Government analysis, which predicted a 10% decline in trade.

But the figures may benefit from the fact that the UK has delayed the implementation of many of its post-Brexit border controls until 2022. Starting in January, EU imports will need to be accompanied by an immediate customs declaration. and food products will face inspections starting in the summer.

Britain has made only limited progress in signing trade deals that go beyond the conventions it enjoyed as a member of the EU. Earlier this month, the UK signed its first fully independent trade agreement, with Australia, and preliminary terms were agreed with New Zealand. But the economic momentum from both deals is expected to be limited. A trade deal with the United States, touted as one of the main benefits of Brexit, seems to be years away.

Increase

Even before the UK completed its separation from the EU in late 2020, Brexit had reduced the size of the UK economy by roughly 1.5%, according to estimates by the Office for Budget Responsibility. That was due to a drop in business investment and a transfer of economic activity to the EU in anticipation of higher trade barriers.

Since the UK-EU free trade agreement came into force, declining trade volumes mean that Brexit is on track to cause a 4% reduction in the size of the UK economy in the long run, according to the entity. That’s in line with his pre-Brexit forecast.

Working market

Brexit has exacerbated the crisis in the UK labor supply. Around 200,000 European citizens left Britain in 2020, driven by stricter immigration rules and the deepest economic depression in three centuries. That helped trigger shortages in sectors like hospitality and retail, which have historically relied on EU workers, and caused shortages.

A smaller group of the EU workforce also worsened Britain’s fuel crisis, due to a shortage of tanker drivers, which contributed to fuel shortages during the summer. The Johnson government has relaxed visa requirements for EU workers, and since then the driver deficit has narrowed as more domestic drivers have been trained.

Finance

Brexit has pushed financial firms to move at least some of their operations, personnel, assets or legal entities out of London to the EU, but the change has been less than anticipated, in part because the pandemic has hampered the relocations of the personal.

According to a survey by firm EY released this week, London has lost around 7,400 jobs, down from a previous estimate of 7,600. That’s well below some estimates made before Britain left the bloc. In 2018, Bruegel, a think tank, said London could ultimately lose 10,000 banking jobs and 20,000 positions in the financial services industry.