And so another week goes by in the strange parallel worlds of post-Brexit Britain. The business secretary, writing in the pages of The Daily Express, regaled us with the government’s “export success stories” which are apparently allowing Britain’s trade to ‘boom’: Kemi Badenoch hails £868bn UK exports bonanza in huge Brexit trade victory.
She told readers that “the £62 billion total year-on-year increase in current prices has proved the Brexit naysayers are wrong”.
Her comments were in sharp contrast to those of William Bain, head of trade policy at the British Chambers of Commerce (BCC) and perhaps one of the naysayers himself. He put out a quite different statement saying that “after a 3.4% decline in goods exports volumes to the EU in September a ‘further slump’ of 7% occurred in October. Drops in exports of chemicals, manufactured goods (including pharmaceuticals) and food were the main areas of decline in exports to the EU.”
Now this is all very odd since they were both commenting on the latest trade figures from the Office for National Statistics (ONS) which are given in the chart below. If you have a spare afternoon and a magnifying glass you might want to see if you can find the ‘boom’ Badenoch was referring to. Good luck.
The chart shows that when adjusted for inflation as CVM or chained volume measures (in light blue), both EU and non-EU goods exports are still below the pre-pandemic levels of three years ago.
If trade in goods wasn’t booming, what about services? Sadly the ONS say, “On trade in services, import and export volumes both fell slightly”. No comfort there then either. It turns out what the business secretary was actually celebrating was Britain’s G7-leading rate of inflation.
Daily Express readers are obviously among the 2% who still believe Brexit is going very well and it isn’t hard to see why.
John Longworth, a former director general of the BCC (until he was dismissed for supporting Brexit) gleefully tweeted: “UK Manufacturers see output surge in Q4 according to Make UK-Export orders surpassed domestic orders for the first time in four years suggesting that firms are taking advantage of either faster-growing or new markets.”
This was sparked by a slightly more nuanced joint report by Make UK and global accountants BDO, which did indeed say export orders exceeded domestic ones but added:
“Whether this is down to a genuine growth in the export scene, rather than a sign of slowdown in the domestic market remains to be seen.”
Not really a ‘surge’ at all then?
Richard Austin, head of manufacturing at BDO, said the manufacturing “sector [was] fatigued by operating in what it perceives as an uncompetitive business environment, especially compared to its partners and competitors across the Channel”. Oh dear. John, for reasons best known to himself, didn’t mention that.
Only last week, Make UK’s CEO Stephen Phipson was urging the government to do more to assist trade saying British manufacturers faced a “minefield of challenges” when dealing with the country’s largest trading partner. He didn’t get a mention in The Daily Express.
Anyway, we added 18 downsides this week and one upside.
Financial services
Europe’s largest package holiday airline Tui is contemplating shifting its stock exchange listing from the FTSE 250 to Frankfurt, in what The Guardian have described as a “further blow” to London’s status as a global finance centre. While Brexit isn’t explicitly mentioned, the company said a move to Germany could lower costs and yield “potential benefits to EU airline ownership and control requirements”.
The Treasury select committee has described as a “damp squib” Jeremy Hunt’s ‘Edinburgh reforms’ which he described as the “next chapter for UK financial services”. Chair of the committee Harriett Baldwin, said none of the reforms implemented so far “will make a substantial difference to the UK economy”.
And it transpires that Brexit has actually boosted trade in one respect. According to Neale Richmond, an Irish minister of state speaking during an event at the Irish embassy in Paris, Ireland’s services exports to France almost doubled between 2016 and 2021 (from €6.4bn to €11.4bn) largely due to The City losing financial passporting rights after Brexit.
Our loss is Ireland’s gain. So, not all bad news.
Citizens
Brexit continues to inflict stress on ordinary citizens. A 74-year old French-born Leicestershire grandmother and former chip shop owner was threatened with deportation after 42 years in the country when a Home Office email went into her junk folder causing her to miss a deadline in an application for settled status.
And in a sign of the real reasons behind Brexit, part-time and shift workers are said to be in danger of losing up to £248mn in holiday pay after the government announced changes to the method by which holiday days and pay are calculated. Richard Arthur, head of trade union law at Thompsons Solicitors, said:
“This move takes advantage of what the government is allowed to do post-Brexit.”
Workers will soon be able to see those Brexit freedoms in their own pay packet.
Food and wine
Labelling all meat and dairy products sold in the UK from October next year as ‘Not for EU’ is proving to be a big problem. Agreed under the Windsor framework, it will apply even if there is no intention to send the products to Northern Ireland. The move could see EU exports of British food plummet because of the costs and inefficiency of doing separate production runs for the EU market. Sean Ramsden, director of the Food and Drink Exporters Association and the CEO of food export business Ramsden International, described the new system as “absolutely cataclysmic for food exporters”.
Brexit is claimed to be behind a ‘surge’ in cases of salmonella due to a lack of quality checks on food entering the UK according to the National Farmers’ Union (NFU). The farmers union said Britain was experiencing recurring cases of salmonella because meat, poultry and eggs have not been checked properly since leaving the EU. Note: EU member states are under no obligation to check products not placed for sale on the single market.
An independent wine and spirits supplier says there is “no doubt” Brexit was having “a significant impact on the wine industry” as a whole. Ed Baker, MD of Kingsland Drinks, told The Grocer magazine that:
“The biggest effect has been the insidious impact of extra bureaucracy and uncertainty, which has consumed large amounts of time and generated inefficiency for no benefit.”
And to quantify it, another vintner has claimed that Brexit has added over £3 to every bottle of wine sold this Christmas. Daniel Lambert, who runs a wine importing business handling millions of bottles of wine a year, says, “The extra red tape has put about £3.50 on every bottle of wine you buy”.
Immigration
The independent Migration Advisory Committee (MAC) claims that the UK’s system of post-study work visas is likely to be fuelling low-wage migration rather than drawing “global talent” into high-skilled jobs. The so-called ‘graduate route’ had made the UK a “significantly more attractive destination” for those who wanted to enter its labour market, the MAC said.
The director general of the British Chambers of Commerce (BCC) told the Financial Times last week that the latest immigration reforms, including an increased salary threshold for skilled worker visas, would exacerbate labour shortages. Shevaun Haviland, said the package “will make the job market tighter in theory and will reduce the number of people coming”.
Northern Ireland
No despatch from the bunker is complete without mentioning Northern Ireland, where the immigration rule changes are even more threatening. Employers in the province warn of staff shortages across manufacturing, care, and food production, according to the BBC. The average salary in the province is £30,000 but the new minimum salary needed for skilled overseas workers at £38,700 is far above it. Darragh Cullen, the MD of Edge Innovate in Dungannon, said the changes will limit his company’s growth and cause huge damage.
And trade diversion continues apace. Latest figures show the value of goods shipped from GB to Northern Ireland fell by 2.4% in 2022, the BBC reports, even as the value of goods imported from the Republic of Ireland, the wider EU and the rest of the world all increased. The fall is being attributed to the Windsor framework.
Note also, the figures are not inflation adjusted which may indicate an even larger fall.
The UK economy
Reacting to ONS trade statistics published last week the head of trade policy at the BCC, William Bain, urged the UK government to take further measures to support exports, especially to the EU.
“Following the 3.4% decline in goods exports volumes to the EU in September a further slump of 7% occurred in October. Drops in exports of chemicals, manufactured goods (including pharmaceuticals) and food were the main areas of decline”, he said.
The EU has reached a provisional agreement on the world’s first legislation governing the use of artificial intelligence (AI). Anu Bradford, a Columbia Law School professor and an expert on the EU and digital regulation who first coined the phrase ‘the Brussels effect’ said other countries “will likely emulate many aspects of it”.
Bradford said it was not efficient for AI companies to re-train separate models for different markets, suggesting the UK will eventually be forced to follow suit.
Government
In a sign that the government is realising the cost of going it alone and having to staff up to carry out all the back office functions the EU used to do for us, deputy PM Oliver Dowden has admitted that civil service numbers in Whitehall have seen a “very big expansion” as a result of Brexit and Covid-19.
Environment
To remind us what Brexit means in practice, CHEM Trust a registered charity, in a report proposing that Britain should adopt the Swiss chemicals regulatory system claims the UK system (UK REACH) is facing “considerable difficulties establishing an effective, high-standard regime as a standalone system” since leaving the EU’s regulatory orbit.
This is said to be due to a lack of capacity (of both data and staff) and its deregulatory focus, with a system “acting on just a fraction of harmful substances the EU is banning or implementing controls on”.
Upsides
Just the one this week. Badenoch, as part of the government’s de-regulation drive, announced a consultation on changes to employment law which she claimed could help save businesses around £1bn a year.
The reforms, she said, would cut unnecessary red tape on recording working hours, streamline engagement with workers when a business transfers to new owners, and provide up to 5 million UK workers greater freedom to switch jobs by limiting non-compete clauses.
