The effects of Brexit were not long in coming. According to figures released Thursday, March 11 by the British National Statistics Office (ONS), the United Kingdom’s foreign trade fell sharply in January:
- exports of goods plunged 19.3% to 5.3 billion pounds due to an almost 41% plunge in exports to the EU;
- For their part, imports of goods collapsed by 21.6% in January, due to a 2.9% plunge in purchases of goods from the EU.
In price and volumes, it is “The biggest drop in a month since these figures started to be measured in January 1997”, notes the ONS. The exit from the single European market entered into force on 1er January and had a strong impact on foreign trade, between bottlenecks in ports already under pressure with the pandemic and travel restrictions that took place in January, and backlogs of orders accumulated since the start of the crisis sanitary. To this were added multiple red tape, additional and sometimes unexpected costs and taxes that weighed on cross-border trade. The British authorities also announced on Thursday March 11 that the control measures on certain goods from the European Union would not come into force before 2022 to give companies time to adapt.
Foreign trade figures released on Friday “Are the first since the end of the transition period after leaving the EU”, underlines the ONS, also arguing that containment had played in the disruptions in international trade. “Part of the decline can be attributed to containment, stockpiles and early problems” leaving the EU, but “It is clear that the Brexit transition has been far from smooth”, notes Danni Hewson, economist at AJ Bell. “The markets will watch closely if the current frictions translate into long-term changes”, she adds.
Craftsman of Brexit, the government of Boris Johnson immediately put into perspective, citing “A unique combination of factors”. This numbers “Do not reflect the entire post-Brexit EU-UK relationship (…) and freight volumes between the United Kingdom and the European Union returned to their normal level at the beginning of February “, commented a spokesperson for Downing Street.
UK GDP shrinks 2.9%
In fact, Brexit has only worsened the crisis caused by the pandemic. This is the whole of the activity which contracted in the United Kingdom in January, in particular because of the measures to fight against a very contagious variant of SARS-CoV-2.
British GDP fell 2.9% in January after rising 1.2% in December, according to ONS figures. It is still 9% below its February 2020 level, before the shock of the pandemic. “Restrictions were in place to varying degrees across” the country in January, including strict containment in England, and the service sector was the main drag on the economy with the closure of all non-essential businesses, recalls the ONS. “The economy was hit hard in January although a little less than some feared, with stores, restaurants, hairdressers, schools affected” by activity restrictions, comments Jonathan Athow, ONS statistician.
He also points out that the manufacturing sector recorded its first drop in production since April, especially of automobiles, even if the health services were boosted by the vaccination campaign. Last year, GDP suffered a record contraction of nearly 10% in the United Kingdom, the European country most bereaved by the pandemic, and a member of the G7 which has experienced the biggest fall in its economy.
A return to normal in early 2022?
For Paul Dales of Capital Economics, January should be the “The lowest point for this year given that the vaccination campaign and the reopening of the economy should stimulate a rebound in activity”. January’s figures are also suffering from an unfavorable comparative effect, also recalls the ONS, because in November and December British foreign trade had on the contrary benefited from an influx of imports and exports, with companies trying to stockpile in anticipation of the effective exit from the single market and potential disruptions in early 2021.
“By the beginning of next year, we believe that (…) GDP will have returned to its pre-pandemic level ”, he adds. Schools reopened in England on Monday, and non-essential businesses are expected to follow April 12, before restrictions currently planned for now by the end of June are lifted by the British government.
Our selection of articles to understand Brexit
