The United Kingdom’s (UK) Chancellor of the Exchequer, Rishi Sunak, admitted on Wednesday that the sharp decline of British exports compared to other G7 economies is due to the impact of Brexit.
Sunak was responding to a report on recent developments in international trade published by the Netherlands Bureau for Economic Policy Analysis, known as the CPB. According to the report, while global trade exports rose by 8.2% in the three months leading up to January compared to the same period in 2020, the UK’s exports declined by 14% over the same period.
Moreover, a report by the Office for Budget Responsibility (OBR) last week claimed that leaving the European Union (EU) in 2019 has resulted in the UK’s imports and exports declining by 15%. “This fall in the trade intensity of UK output is likely to reduce the level of potential productivity, though the size of this effect is uncertain,” the OBR said, adding that production could decline further by 4% during the next 15 years.
In this regard, Sunak said that while the UK’s poor trade performance “might well be” due to Brexit, such changes are an “inevitable” result of major economic changes, especially when the UK changed the nature of its trading ties with the EU. Sunak noted that Brexit was “always going to have an impact on trade flows.” He also said that Treasury officials are trying to establish the exact cause for Britain’s poor trade performance and that it is “too early” to definitively conclude that Brexit has impacted trade.
Rishi Sunak has just told Treasury select committee that change in trading relationship was always going to have negative impact. Not sure that was part of the Brexit sales pitch
— John Crace (@JohnJCrace) March 28, 2022
However, OBR chairman Richard Hughes said that Brexit has made it more difficult to trade with the EU and negatively impacted the UK’s trade intensity with Europe. Other experts have noted that a combination of Brexit and the COVID-19 pandemic has left the UK struggling economically and projected that export growth will continue to “remain sluggish” as British exports continue to be slowly cut out of global supply chains.
🚨🚨UK goods exports fell 14% in 3 months to Jan v same period in 2020, according to Netherlands Bureau for Economic Policy Analysis. Stark contrast to the global average of an 8.2 per cent rise over the same period. #brexit Via @valentinaromei https://t.co/eextm8VFs6 pic.twitter.com/10UxSn2vDP
— Peter Foster (@pmdfoster) March 26, 2022
One of the promises made by the Conservatives following Brexit was that the government would be able to sign trade deals with countries independent of the EU, which they said would inevitably lead to greater economic growth. In fact, the UK has signed more free trade agreements than any other country since 2021. However, as the reports demonstrate, these deals have not translated into greater trade productivity for London.
Mel Stride - There's been a slump in the level of UK trade with the EU, but the other EU countries have come back strongly... isn't this down to brexit?
— Haggis_UK 🇬🇧 🇪🇺 (@Haggis_UK) March 28, 2022
Rishi Sunak - It was always inevitable that there would be a change in our trade intensity... that was expected... pic.twitter.com/kz05R1AiKS
Apart from the impact on the UK’s economy, Brexit has also led to trade disputes with EU countries, especially with France over fishing rights and with the EU as a whole over the Northern Ireland Protocol.
Under the Brexit agreement, European vessels can continue to fish in British waters if they obtain a license. However, in order to secure a license, boats need to prove that they fished in British waters prior to the Brexit deal, which several smaller French boats have found it difficult to fulfil owing to a lack of technology to confirm this information. As a result, the UK has refused to give permits to French fishing boats due to insufficient documentation and evidence.
France argues that these boats and their records are public knowledge and claims that British authorities have purposely refused to grant licenses to replacement vessels. Consequently, it has accused the UK of violating the post-Brexit agreement and threatened it with sanctions.
In the case of Northern Ireland, a protocol was drawn up to protect the EU’s single market amid Britain’s exit from the bloc to avoid maintaining a politically-sensitive hard border between Northern Ireland, which belongs to the UK, and the Republic of Ireland, which is an EU member country. The protocol has created a new border in the Irish sea that has angered the province’s pro-British unionists.
The agreement has led to a rift between the two sides, with the UK trying to renegotiate a new deal for the past six months. Britain has been demanding the removal of customs control on goods being transported from mainland Britain to Northern Ireland. However, the Union says this demand would open a backdoor for British goods to enter the bloc’s single market unchecked.