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Monday, February 12, 2024

The Brexit export hole

The Independent reports that Brexit is leaving a hole of almost £100bn in annual UK exports, making Britain’s economy worse off than if it had remained in the European Union.

Quoting an analysis by the Centre for European Reform (CER), the paper says that businesses that make an array of products including sporting goods, children’s toys, jewellery and medical equipment have struggled the most with border costs imposed by the UK’s decision to leave the EU, leading to 30 per cent less trade between 2020 and 2023 than if Britain had stayed in the trading bloc:

Since leaving the single market, Britain’s export growth has been sluggish behind other advanced economies, leading to missed growth in goods and services exports of around £23bn quarterly, the analysis reveals.

John Springford, an associate fellow at the Centre for European Reform (CER), a pro-EU think tank, said his analysis “shows that Brexit is leading to permanent depression to trade between the UK and the EU”.

“If Brexit hadn’t happened, and we can visit the universe where Remain won the referendum, then trade and [the economy] would be significantly higher,” he said.

Mr Springford dismissed arguments from Brexiteers that further trade deals with countries outside of the EU could make up the economic shortfall.

“That argument violates one of the few absolute certainties we have in international economics, which is that trade with nearby large economies is always going to be much bigger than trade with distant smaller economies,” he said.

Economist Thomas Sampson, an associate professor at the London School of Economics (LSE), said Brexit had been a “drag on the economy” and described Mr Springford as a “respected analyst”. Mr Sampson said that while there was nuance in how to interpret the numbers, you “cannot question the quality of his work”.

The gloomy data supports arguments from other economists that leaving the EU has damaged the UK’s financial health and not freed up the £350m a week for the NHS that Boris Johnson and the Leave campaign promised.

The paper provides a detailed analysis of the impact of Brexit on the UK economy, including that it has already cost the UK economy £140bn in lost growth than it would have had if the UK opted to remain in the customs union and single market and that, looking at the growth through the prism of gross value added (GVA) – the overall value of goods and services – it would leave the UK £311bn worse off by 2035.

Click the link to read the rest.
It would have been good if you'd backed up your argument with more references.

This is what the Commons reports says:

The UK had a trade deficit of £92 billion with the EU compared to a £5 billion surplus with non-EU countries.

"Total UK exports (goods and services combined) to both the EU and non-EU countries were lower than their 2019 level in both 2020 and 2021. In both cases, exports exceeded 2019 levels in 2022. These figures are in current prices so are not adjusted for inflation. This needs to be borne in mind given current high levels of inflation. Underlying trends may also have been distorted by exports of precious metals to non-EU countries.

Similarly, imports of goods and services from both EU and non-EU countries have now exceeded 2019 levels, in current prices."

Even before Brexit, there was a high trade deficit with the EU but a trade surplus with the ROW. So wouldn't this be an argument to expand trade generally with the ROW rather than expand a deficit with the EU?

The EU is highly mercantilitic in its approach to trade especially with Germany as its largest and most powerful member. It is not now and never has been a particularly good trading partner- at least as exports are concerned.

This post is not about a trade deficit it is about a fall-off in exports and the impact on the economy as a result of Brexit
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