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London
CNN
–
It’s been two years since former Prime Minister Boris Johnson signed the Brexit trade deal and triumphantly declared that Britain would be “prosperous, flexible and happy” after leaving the EU.
A Brexit deal would allow UK companies to do “more business” with the EU, and would leave Britain freer to strike trade deals around the world, while continuing to deliver seamlessly to the EU market of 450 million consumers.
In reality, Brexit has hurt the UK economy, which remains the only member of the G7 – the group of advanced economies that includes Canada, France, Germany, Italy, Japan and the United States – with a smaller economy than before. Epidemic.
Years of uncertainty about the future of trade 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 the UK-EU trade deal being in place for two years.
And as other parts of the world are experiencing a post-pandemic trade boom, the pound has fueled inflation by making imports more expensive and failing to boost exports.
Brexit has created trade barriers for UK businesses and foreign companies that use Britain as a European base. A concentration on exports is a waste of investment and contributes to labor shortages. All this exacerbated Britain’s inflationary problem, hurting workers and the business community.
Associate Director of the Center for Inclusive Trade Policy at the University of Sussex L. “Brexit is the most compelling reason why Britain is doing relatively worse off than comparable countries,” Alan Winters said.
A bleak mood over the UK economy has been gripped by a growing number of workers struggling with pay and conditions as the worst inflation in decades eats away at their wages. At the same time, the government is reducing spending and taxes to fill the budget hole.
Although Brexit is not the cause of Britain’s cost of living problem, it has made it difficult to solve.
“The UK voted for Brexit in a referendum, but the government chose a particularly hard Brexit, which raised the economic cost,” said Michael Sanders, senior adviser at Oxford Economics and former Bank of England official. “Any hope for economic growth from Brexit is pretty much gone.”
Although Britain voted to leave the EU in June 2016, its exit from the single market and customs union was only completed on 24 December 2020, when the two sides finally reached a free trade deal.
The Brexit deal, known as the Trade and Cooperation Agreement, comes into effect on January 1, 2021.
It eliminated tariffs on most goods but introduced non-tariff barriers such as border controls, customs inspections, import duties and health controls on plant and animal products.
Before Brexit, a farmer in Kent could just as easily send a load of potatoes to Paris as he could to London. Those days are gone.
Michelle Owens, founder of Small Business Britain, said: “Every day we hear stories from small businesses about forms, transport, couriers, things being bogged down for weeks at a time… campaign teams.
“The way things have turned out over the last couple of years has been very bad for small businesses,” Owens told CNN.
According to researchers at the London School of Economics, exports of various UK products to the EU fell by 30% in the first year of Brexit. He said this was possible due to the exit of small exporters from the EU markets.
Take the example of Little Star, a British company that manufactures jewelry for children. The business started in the Netherlands with plans to expand to France and Germany. But since Brexit, only two of its more than 30 Dutch clients have been prepared to handle the costs and paperwork to get shares from the company.
Rob Walker, who founded the business with his wife Vicky in 2017, says import duties and sales taxes have made it difficult to compete with European jewelers, with products that used to take two days now taking three weeks. The company is now looking to the United States for growth opportunities.
“Doesn’t it annoy us to look across the Atlantic because it’s so hard to do business with people 30 miles away?” Walker said.
A British Chamber of Commerce survey of more than 1,168 businesses, published this month, found that 77% said Brexit had not helped them increase sales or grow their businesses. More than half of them found it difficult to adapt to the new rules for trading goods.
Citrite Construction Supplies in Dorset told the chamber that importing parts from the EU to repair damaged machinery has become a costly and “time-consuming nightmare”.
“Brexit has become the biggest bureaucratic burden on business,” Siteright explained.
Nova Dog Chews, a manufacturer of dog snacks, could have lost all of its EU business if it hadn’t complied with the deal, he said. “If it wasn’t for Brexit, it has cost our businesses a huge amount of money that could have been invested in the UK,” he added.
A UK government spokesman told CNN that the government’s Export Support Service has provided “practical support” to exporters in the implementation of the Brexit deal. The agreement is “the world’s largest zero-tariff, zero-quota free trade agreement,” the spokesman added. “It will ensure UK market access in key service sectors and open up new opportunities for UK businesses around the world.”
Britain will not easily replace what it has lost by losing the world’s largest trading bloc.
The only substantive new trade deals it has struck since leaving the EU, which did not simply complement their agreements as EU members, were with Australia and New Zealand. According to the government’s own estimates, these would have a negligible impact on the UK economy, increasing GDP in the long term by 0.1% and 0.03% respectively.
In contrast, the UK’s Office for Budget Responsibility, which produces economic forecasts for the government, expects Brexit to reduce Britain’s output by 4% over 15 years. Exports and imports are expected to be around 15% lower in the long run.
The first data confirmed this. According to the OBR, UK exports to the EU in the fourth quarter of 2021 were 9% lower than in 2019, while imports from the EU were 18% lower. Exports to non-EU countries were 18 percent weaker than in 2019.
The UK “has fallen by 12% as a share of GDP since 2019, two-and-a-half times less than the G7 countries, making it the least trade-intensive economy,” the OBR said in a March report.
June Du, professor of economics at Aston University in Birmingham, said the decline in exports outside the EU could be a sign that British businesses are less competitive as they grapple with higher supply chain costs in the wake of Brexit.
“England’s trading capacity has been permanently damaged. [by Brexit]Du told CNN. “It’s not that he can’t recover, but he’s been set back for a few years.”
Research by the Center for European Reform suggests that in the 18 months to June 2022, UK trade in goods would be 7% lower than if Britain had stayed in the EU.
Investment is 11% weaker and GDP is 5.5% lower than it was, costing the economy £40 billion ($48.4 billion) a year in tax revenue. That’s enough to pay for three-quarters of the spending cuts and tax hikes that UK Chancellor of the Exchequer Jeremy Hunt announced in November.
The UK is expected to be one of the best performing countries in the developed world next year.
The Organization for Economic Co-operation and Development expects the UK economy to shrink by 0.4%, which is second only to Russia under sanctions. GDP in Germany is forecast to be 0.3 percent lower.
The International Monetary Fund predicts that UK GDP will grow by just 0.3%; It is ahead of only Germany, Italy and Russia.
Both institutions say higher inflation and interest rates will weigh on spending for consumers and businesses in Britain.
The Confederation of British Industry, the main trade group, said the fall in private sector activity accelerated in December and has now fallen for five consecutive quarters.
The downward trend “looks set to deepen” in 2023, Martin Sartorius, chief economist at the CBI, said in a statement.
“Businesses continue to face multiple headwinds, with rising prices, labor shortages, and weakening demand contributing to a bleak outlook for the year ahead. ”
—Julia Horowitz contributed to this report.
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