Brexit: Trade drop is the start of the post-Brexit overhaul

  • UK trade with the European Union slumps in the first quarter of 2021
  • Britain opens new trade consultation to secure an India trade deal
  • British pound to euro (GBP/EUR) exchange rate undermined by Brexit and further coronavirus concerns
  • Experts urge the British government to protect the classic car industry
  • Deutsche Bank relocating hundreds of workers post-Brexit
  • Switzerland’s clash with the EU puts EUR 227BN worth of trade at stake

Six months on from the Brexit transition period and a report published by the Office for National Statistics (ONS) revealed that disruption caused by new Brexit rules and regulations had impacted trade between the UK and the EU.

According to the latest figures from the ONS, UK exports decreased by 18% in the first quarter of 2021, while EU imports collapsed by 22%.

Although trade with the rest of the world was relatively unchanged, with imports 0.9% lower and exports 0.4% higher, the drop in trade between the EU and the UK was far from the “minimal” disruption observed by ministers earlier this year.

While the drop in trade was consistent across the bloc, the data showed that exports to Ireland contracted the most.

The data has also undermined the British pound to euro (GBP/EUR) exchange rate, which has retreated from last week’s high of EUR 1.1649 to trade at EUR 1.1574 in midweek trade.

UK Prime Minister Boris Johnson claims that trade disruption is due to short-term “teething problems”. The Prime Minister is adamant that Britain will overcome its troubles over time as it adjusts to the new trading relationship and strikes new trade deals with other nations worldwide.

According to the latest media reports, Britain entered formal negotiations with India today. The UK will begin a 14-week consultation with the country on a potential free trade agreement, which the UK Prime Minister believes could double trade between the two nations by 2030.

International Trade Secretary Liz Truss is believed to be targeting tariffs on cars, alcohol and digital products as India is expected to grow into a leading tech hub in the coming years.

Still, business leaders are warning of the long-lasting damage and consequences of Brexit for the broader British economy.

In a statement to the UK government, Labour Party politician Lord Adonis wrote: “The Brexit deal damages Britain’s economy, jobs, security, trade of vital goods and the respect with which the UK is held.”

Although the ONS has said it is extremely difficult to differentiate Brexit damage from the devastation caused by the coronavirus pandemic, the non-ministerial department acknowledged that companies have struggled with post-Brexit rules.

UK trade with EU slumps in first quarter

Brexit concerns linger for British firms

According to an ONS survey, a significant number of firms are reporting Brexit over COVID-19 as their primary challenge for 2021.

Among the British companies that have exported in the past 12 months, 38% said extra paperwork had caused significant disruption since February.

UK trade disruption with the EU can be emphasised further by data showing that China has replaced Germany as Britain’s largest import market for the first time on record.

While the jump in trade with China has partly been fuelled by COVID-19, with demand for Chinese textiles such as Personal Protective Equipment (PPE) increasing, goods imports from the country have risen by a staggering 66% since 2018 to GBP 16.9BN.

Although the EU continues to be Britain’s largest trading partner, on a single import market basis, trade with Germany has slumped by 25% since 2018 to GBP 12.5BN.

However, the decrease in exports seen during the first quarter of 2021 follows major stockpiling in the last quarter of 2020 due to heightened Brexit uncertainty.

Data from the ONS has also shown that exports to the EU rose near pre-Brexit levels in March 2021.

Will there be a post-Brexit trade bounceback?

After January’s historic plunge, figures from the Office for National Statistics confirmed that March goods exports to the EU rose by 8.6% month-on-month, with overall exports almost level with December 2020 figures.

Imports also jumped higher in March, rising by GBP 800M following January’s GBP 6.6BN contraction.

Professor Thomas Sampson from the London School of Economics (LSE) suggests that the “incomplete bounceback” witnessed in February stalled in March, and there is scope for further improvement.

Although there is no certainty that UK trade with the EU will return to pre-Brexit levels, imports and exports with the rest of the world could increase and provide Britain with more lucrative opportunities.

However, the Office for Budget Responsibility (OBR) expects the UK’s departure from the EU to reduce the size of the economy by 4%, noting that the full impact of Brexit will take at least 15 years to come to fruition.

Today, it also emerged that the classic car industry is at serious risk of damage due to post-Brexit trading rules.

Britain’s classic car industry in jeopardy due to new Brexit rules

Conservative MP and former Transport Minister, Nus Ghani, is backing a new Historic and Classic Vehicles Alliance (HCVA) to protect the classic car sector, which may not survive under new Brexit rules.

The HCVA warned the UK government that post-Brexit trading rules around car imports and exports and misunderstandings about the impact vintage cars have on the environment damage owner confidence and undermine the sector.

The group said that classic car companies are trapped in a “bureaucratic nightmare” and that failure to support the sector places more than 100,000 jobs across the UK at risk.

MP Nus Ghani said the group would do “all we can” to support the classic sector and educate the public about how classic cars have a minimal impact on emissions.

Environmental concerns are of high priority to the HCVA, and members have argued that restored classics are the “epitome of sustainability” as their parts have been reused for decades.

The group argues that, unlike modern vehicles, classic cars are driven 16 times a year on average, so they cannot be held accountable for the emissions issue.

HCVA members have stated that the classic motor industry – worth an estimated GBP 18BN – contributes significantly to UK gross domestic product (GDP). The group also stresses that it has become even more crucial to protect vintage cars as the UK transitions to net-zero emissions.

Classic car firms are not the only sector of the economy under threat post-Brexit, as London’s financial industry appears to be undergoing a major overhaul.

According to a Financial Times report, the multinational investment firm Deutsche Bank is making 400 staff redundant and relocating staff to the EU post-Brexit.

Deutsche Bank to relocate 100 employees from London

Several British and European firms have relocated staff, moved their business operations or developed new skills in the wake of Brexit.

According to a new report from specialist recruiter Robert Half, 85% of British firms have transformed their business operations post-Brexit. In comparison, 56% of UK companies believe that Britain’s departure from the European Union has had a negative impact.

Meanwhile, 44% of survey participants said they had restructured job roles, 20% stated they had made redundancies, and 16% said they relocated staff.

Robert Half noted that only 15% of respondents admitted that they had not made any changes following Brexit.

The findings highlight the impact Brexit has had on the way UK businesses operate as well as the challenges and opportunities exposed to each organisation, “especially coming on the heels of the changes brought about by COVID-19,” says Matt Weston from Robert Half UK.

Deutsche Bank will relocate 100 employees to the EU and Asia but lay off 400 team members. Although some of its London-based workers will be offered the opportunity to work in the European Union, they will have to accept a 25% pay cut.

The German-owned bank isn’t the only lender to announce job relocations as HSBC and Citigroup have already moved jobs out of London. The American investment bank, JP Morgan, is also considering employment moves.

According to the latest reports, financial services companies have moved or plan to move more than GBP 900BN in assets to the European Union due to new trading rules – equivalent to 10% of Britain’s banking system.

There have also been several calls for the UK to rethink its post-Brexit policy for migrant workers amid growing fears over labour shortages.

Britain’s meat sector warns of potentially damaging labour shortage

Several industries, including Britain’s meat sector, have urged the UK government to revise its post-Brexit migrant policy amid fears that they face an exodus of skilled workers.

The UK meat sector, which relies heavily on European workers, fear that thousands of migrant workers could be forced to return to the EU due to not being processed under the EU settlement scheme before the June-end deadline.

According to the settlement support charity, Settled, officials have a significant backlog of people to process for the scheme, and tens of thousands of European workers are yet to apply for settlement status.

The news comes as the British Meat Processors Association (BMPA) warns that they have seen a significant decline in staff at meat processing factories and expect the labour shortage to worsen over the coming months.

Most European workers would come to the UK for short-term stints of approximately two years, work and save money before returning home, which has provided the industry with a steady influx of new workers.

However, as the EU settlement scheme only applies to immigrants already working in Britain, “new Brexit laws mean that the flow of incomers is drying up,” says James Hook, director of poultry firm Hook 2 Sisters.

Despite having taken place more than four years ago, it’s clear that Brexit continues to divide opinion, with the effects of the UK’s departure from the EU causing widespread disruption and problems for several businesses.

However, Brexit has also exposed weaknesses in the bloc, with European Economic Area (EEA) countries Norway and Iceland are reportedly keen to exit.

Today, it also emerged that Switzerland is heading towards a “Brexit-like EU clash” over trade, with more than EUR 227BN at stake.

Switzerland and EU bump heads over trade exports

According to a City AM report, Swiss medical companies can no longer export duty-free to the EU after Bern and Brussels failed to set aside their differences over a highly-anticipated political treaty.

Despite months of talks, failure to agree on a new umbrella treaty means that trade between the two countries will continue to be managed through loose individual deals.

Switzerland will also be downgraded to “third country” status, meaning they will be subject to the EU’s red tape and lose a range of other benefits, much like the UK.

Swiss businesses are now facing higher production costs due to the disappointing result, which is believed to have wiped out EUR 227BN (GBP 196BN) worth of trade between the bloc and Switzerland.

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