Boris Johnson and voters feel the pain of Brexit
Britain’s trade with the European Union has declined since the country left the bloc. Supply chain shortages have been exacerbated and inflation fueled.
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 European Union (EU) workforce, on which many companies had come to depend. The combination has exacerbated supply chain shortages, fueled inflation, and hampered trade says a Bloomberg report.
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, the majority of the British population would now vote in favor of rejoining the EU, including 1 in 10 people who voted to leave the bloc in the 2016 referendum.
A few days ago, David Frost, Johnson’s key partner in the EU withdrawal negotiation, 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 that Brexit is disappointing those who saw it as a once-in-a-generation opportunity to restore government regulation.
EU trade
Britain’s trade with the EU has declined since the country left the bloc
In October, the UK’s trade 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 after the Center for the European Reform, a group of independent experts. 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 those 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 US, touted as one of the main benefits of Brexit, seems years away.
Even before the UK completed its separation from the EU, 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 Brexit is on track to cause a 4% reduction in the size of the UK economy in the long run, according to the entity.
Labor market
Brexit has exacerbated the UK labor supply crisis. 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 has 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.
Brexit has pushed financial firms to move 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 relocation of personnel
