A view on the possibility of shortages and rising prices, at grace periods for EU exporters to the UK gradually end during 2022.
A no deal separation was avoided at the end of 2020 but despite the detail, the last minute agreement could never be a true conclusion. Too many holes remained, creating practical trade difficulties and ongoing issues in Ireland.
The outcome there is a mixed bag of political unhappiness, increased trade between North and South, a fall in UK exports to Ireland. Those in the opposite direction have increased, although not sufficiently to keep Welsh ports busy.
UK exports to both parts of Ireland share aspects with the wider EU trade picture. Increased admin, a change in sentiment and lack of positive, ongoing negotiation, which have all contributed to a downturn.
A Realistic Picture
Comparing 2021 with the previous year is problematic with the pandemic. The ONS published data in February 2022 which compares 2021 to 2018, their results sit well with other surveys and offer a reasonable picture.
UK exports to the EU are down 12%, imports from the EU have fallen 17%. Trade is still down to a degree worldwide due to the pandemic but far less so. The EU does still account for half our exports, although no longer half our imports.
The latter may seem okay but can cause further losses in ongoing activity. No two businesses, or business sectors will be affected in the same way.
Exports of technology and chemicals are down but not significantly, clothing, vegetables, fruit and live animals have been badly hit. Increased food regulation and how rules of origin relate to tariffs are having an effect.
Renegotiation Required
We left the EU, that is not going to change but in doing so, we carried out an act which no other modern economy has to date. The UK created permanent barriers to trade with their nearest neighbours.
Brexit was not of course an economic act, arguments for that aspect never added up but whatever the reasons, the economy needs supporting. Not least as there is no mad rush to give us wonderful trade deals beyond Europe.
Most deals to date have just been rollovers of our position when in the EU. Countries with an existing EU treaty have been fair in offering this, prospects of us getting a better deal than a major market such as the EU are small.
Although they are substantial trading partners, the EU and US do not have a trade deal. A UK-US deal still hasn’t progressed and this might involve us following American regulation. Swapping that for EU regulations is unlikely to sit well with Brexit voters.
The reality is that Europe is our nearest neighbour, a partner for centuries, culturally close and still a part of significant trade. Continuing negotiation to rebuild our relationship is the most rational path.
A Cooperative Future
Safeguarding fair competition is not easy, or providing a long term solution for Northern Ireland, or eliminating border delays. Technology may ultimately help with the latter but all of them require a will to cooperate.
Although a few politicians have tried to stay positive, the Office For Budget Responsibility confirmed their long term predictions of a reduction in GDP, a cross-party committee of MPs concluded that trade had been suppressed since January 2021.
As matters stand, there are still more restrictions to kick in during 2022, which will logically add to losses. US-EU trade in 2021 bounced back 18% from 2020, China-EU trade 17%, the UK’s trade with the EU just 2%.
2022 would be a great time for UK and EU governments to set aside the rhetoric and focus on building a successful new relationship. This will not be simple and require work on smoothing out checks which can’t be set aside but is possible.
Business has met the government’s request to come to terms with Brexit, leave them free to regulate as they wish. There has been less disruption than some predicted, systems such as the EU ATA carnets we supply are effective.
The UK’s parting from the EU is now history and should be set aside, with both parties working on the positive future we can share.