Brexit has cracked the economic foundation of Britain | Daily News Byte

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London
CNN

It has been two years since former Prime Minister Boris Johnson signed his Brexit trade deal and triumphantly declared that Britain would be “prosperous, vibrant and content” after leaving the European Union.

A Brexit deal would enable UK companies to do “more business” with the European Union, according to Johnson, and free Britain to strike trade deals around the world while continuing to export seamlessly to the EU market of 450 million consumers.

In fact, Brexit has stalled the UK economy, which is the only member of the G7 – the group of advanced economies that also includes Canada, France, Germany, Italy, Japan and the United States – whose economy is smaller than it was before. A nationwide epidemic.

Years of uncertainty over future trade ties with the European Union, Britain’s biggest trading partner, have hurt business investment, which was 8% below pre-pandemic levels in the third quarter despite a UK-EU trade deal in place for nearly two years. .

And the pound has taken a beating, making imports more expensive and fueling inflation while failing to boost exports, even as other parts of the world have enjoyed a post-pandemic trade boom.

Brexit has created trade barriers for UK businesses and foreign companies that used Britain as a European base. It stresses imports and exports, reduces investment and contributes to labor shortages. All this has exacerbated Britain’s inflation problem, hurting workers and the business community.

Co-director of the Center for Inclusive Trade Policy at the University of Sussex L. According to Alan Winters, “Brexit is the most plausible reason why Britain is doing comparatively worse than comparable countries.”

A sense of the gloom hanging over the UK economy has been picked up by striking workers, who are walking out in ever greater numbers over pay and conditions as the worst inflation in decades eats away at their wages. At the same time, the government is cutting spending and raising taxes to plug the hole in its budget.

While Brexit did not cause Britain’s cost-of-living crisis, it has made the problem more difficult to solve.

“The UK chose Brexit in the referendum, but the government then chose a particularly hard form of Brexit, which maximized the economic costs,” said Michael Saunders, a senior adviser at Oxford Economics and a former Bank of England official. “Any hope of an economic recovery from Brexit is pretty much gone.”

NHS nurses strike over pay outside St Thomas' Hospital in London on December 20, 2022.

Although Britain voted to leave the European Union in June 2016, its exit from the Single Market and Customs Union was only scheduled for December 24, 2020, when the two sides finally agreed on a free trade deal.

The Brexit deal, known as the Trade and Cooperation Agreement, came into effect on January 1, 2021.

It eliminated tariffs on most goods but introduced a raft of non-tariff barriers, such as border controls, customs checks, import duties, and health inspections on plant and animal products.

Before Brexit, a farmer in Kent could send a truckload of potatoes to Paris as easily as they could send them to London. Those days are no more.

Michelle Owens, founder of Small Business Britain, said: “Every day we hear stories from small businesses about the nightmare of forms, transport, couriers, things being stuck for weeks at a time… The epic length of the problems is just gobsmacking.” , a campaign group.

“The way things have turned out in the last two years is really bad for small businesses,” Owens told CNN.

Researchers at the London School of Economics estimate that the variety of UK products exported to the European Union fell by 30% during the first year of Brexit. They said this was likely because smaller exporters had pulled out of smaller EU markets.

Take the example of Little Star, a UK company that makes jewelery for children. The business was launched in the Netherlands with plans to expand further into France and Germany. But after Brexit, only two of its more than 30 Dutch customers are willing to handle the costs and paperwork of acquiring stock from the company.

According to Rob Walker, who co-founded the business with his wife, Vicky, in 2017, products that used to take two days to ship now take three weeks, while import duties and sales taxes have made it more difficult to compete with European jewelers. The company is now looking to the United States for growth opportunities.

“Isn’t it crazy that we have to look to the other side of the Atlantic to do business, because it’s so hard to do business with people 30 miles away?” Walker said.

A truck passes the Union Jack at the Port of Dover on April 1, 2021.  The UK government has delayed post-Brexit checks on EU food imports until the end of 2023.

A British Chambers of Commerce survey of more than 1,168 businesses published this month reported that 77% said Brexit had not helped them increase sales or grow their business. More than half said they were having difficulty adapting to the new rules for trading goods.

Dorset-based manufacturer Siterite Construction Supplies told the chamber that importing parts from the European Union to fix broken machines had become a costly and “time-consuming nightmare”.

“Brexit is the biggest ever imposition of bureaucracy on business,” according to Siterite.

Nova Dog Chews, a maker of dog snacks, said it would have lost all its EU business if it had not set up a base in the bloc. “This has cost our business a huge amount of money, which could have been invested in the UK had it not been for Brexit,” he added.

A UK government spokesperson told CNN that the government’s Export Support Service provided “practical support” to exporters on implementing the Brexit deal. The deal is “the world’s largest zero-tariff, zero-quota free trade deal,” the spokesman added. “It secures UK market access in key service sectors and opens up new opportunities for UK businesses around the world.”

Britain will not easily replace what it has lost by seizing unfettered access to the world’s largest trading bloc.

The only significant new trade deals it has made since leaving the European Union, which did not simply roll over its deals as an EU member, were with Australia and New Zealand. According to the government’s own estimates, this would have a negligible impact on the UK economy, increasing GDP by just 0.1% and 0.03% respectively in the long run.

By contrast, the UK Office for Budget Responsibility, which produces economic forecasts for the government, expects Brexit to reduce Britain’s output by 4% over the 15 years it remains in the bloc. Exports and imports are estimated to be around 15% lower in the long run.

Preliminary data has revealed this. According to the OBR, in the fourth quarter of 2021, UK goods export volumes to the EU were 9% below 2019 levels, with imports from the EU down 18%. Exports of goods to non-EU countries were 18% weaker than in 2019.

The United Kingdom “appears to have become a less trade-intensive economy, with trade as a share of GDP falling by 12% since 2019, two and a half times more than any other G7 country,” the OBR said in a March report.

According to June Du, professor of economics at Birmingham’s Aston University, this could signal that UK businesses have become less competitive as they battle higher supply chain costs after Brexit.

“The UK’s ability to trade has been permanently damaged [by Brexit]Du told CNN. “That doesn’t mean it can’t be recovered, but it’s set back by many years.”

Research by the Center for European Reform, a think tank, estimates that in the 18 months to June 2022, the UK’s trade in goods is 7% lower than if Britain had remained in the EU.

Investment is 11% weaker and GDP is 5.5% smaller, costing the economy £40 billion ($48.4 billion) in annual tax revenue. That’s enough to pay for three-quarters of the spending cuts and tax hikes announced in November by UK Chancellor of the Exchequer Jeremy Hunt.

The United Kingdom is projected to be one of the worst performing economies in the developed world next year.

The Organization for Economic Co-operation and Development expects the UK economy to shrink by 0.4%, ahead of only Russia’s sanctioned. GDP in Germany is forecast to shrink by 0.3%.

The International Monetary Fund has forecast UK GDP growth of just 0.3% next year, ahead of only Germany, Italy and Russia, which are expected to contract.

Both organizations say higher inflation and rising interest rates will weigh on spending by consumers and businesses in Britain.

According to the Confederation of British Industry, a leading business group, the decline in private sector activity accelerated in December and has now fallen for five consecutive quarters.

The downward trend “looks set to deepen” in 2023, CBI chief economist Martin Sartorius said in a statement.

“Businesses continue to face a number of headwinds, with rising costs, labor shortages and weakening demand contributing to a bleak outlook for next year.”

— Julia Horowitz contributed to this report.

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