The Covid inquiry is now on Module 2 – core UK decision-making and political governance – and we are starting to get to the nub of the problems surrounding the UK government’s response to the pandemic in early 2020. If you’re wondering what this has to do with us in the downside bunker the answer is that two of the participants have blamed the time spent on Brexit between 2016-19 for the lack of readiness when Covid struck.
And, not just any witness, but Dominic Cummings himself has admitted it, although he blames insiders who hadn’t accepted the result of the referendum for “driving the nation into a three-year constitutional and political crisis” which absorbed much of the focus of the state’s core resources.
His own leading role is somewhat played down.
In his witness statement (paragraphs 43 and 44), Cummings told the inquiry that had the government been able to focus on preparations for large disasters, then “no lockdowns would have been necessary”.
If true, the costs of Brexit, without considering the lives that may have been saved, are considerably higher than even the most pessimistic forecasts. It may yet come to be seen as the greatest downside of them all.
This week we added 16 to the dossier, including one upside.
Trade
Brexit continues to take its toll on Britain’s external trade. A survey carried out on behalf of the British Beauty Council (BBC), has found that customs delays and the increased cost of cross-border trade have led to an £850mn fall in the value of the UK beauty industry’s exports to the EU.
A supplier of men’s personal grooming products in Doncaster with a booming export business pre-Brexit, has ceased selling overseas altogether. Apothecary 87, has essentially ‘retrenched’ to the UK and opened a couple of stores. The business, says founder Sam Martin, has just adapted to the reality of the UK’s new trading environment.
While the business is not in any difficulties, the move does nothing to help close the burgeoning trade gap in manufactured goods which the ONS showed this week hit a post war record of £219.3 bn (8.8% of GDP) in 2022, driven by imports increasing more than exports (£147bn to £91.4bn).
And all the talk before the referendum of leaving the EU’s ‘protectionist’ tariff regime in order to help impoverished African countries seems to be coming to nothing as fears grow that the UK is about to make tariff concessions to large “dollar banana” producers in Latin America at the expense of thousands of workers on small plantations in some of Africa’s poorest nations.
There are also concerns about the quality of food to be imported under the new UK-Australia trade deal after the CEO of the Australian RSPCA warned that standards in Australia ‘fall below’ those in the UK and were ‘basic at best’. Richard Mussell said the country still uses methods long outlawed in Britain and that the standards set in the country are rarely audited and are not mandatory in any case.
Finally, Brittany Ferries has blamed Brexit for a decline in freight volumes with the cross-channel operator reporting freight units on all routes declined to 48,114, from 50,868 in the same four months of 2022 and 59,057 in the summer of 2019.
The company said Brexit had “delivered dividends” when it comes to freight carried between France/Spain and Ireland because it negated the need to use the UK as a land bridge.
Citizens/culture
The Daily Express reports that both Arsenal and Chelsea are likely to miss out on signing what they describe as a 17-year-old Irish ‘wonderkid’ because of Brexit rules. The paper says English clubs have been prevented from signing players from abroad until they turn 18. This isn’t a new downside since Arsenal have already lost out on an Ivorian footballer (see dossier number 1424) but it’s a first for Chelsea I believe.
The UK government is to follow Jersey’s lead (see dossier No 1405) and cut post-Brexit border bureaucracy for French school trips, allowing students from France to use national identity cards instead of a passport. Rules requiring non-EU citizens to obtain a visa to travel with their classmates will also be dropped (see dossier 1340). This comes after surveys showed school trips to the UK from the EU had fallen by up to two-thirds, presumably hitting tourism revenues.
Financial services
In a sign that Brexit is starting to hurt the UK’s financial services sector, the policy chairman at the City of London Corporation, has called for the EU to grant permanent “equivalence” to British financial firms. Chris Hayward said:
“Obviously, we’ve now got our own regulatory rules up to our financial services and markets bill, but we don’t want divergence for divergence sake.”
The EU has only granted temporary equivalence for derivatives clearing which ends in 2025 with Mairead McGuinness, the EU commissioner for capital markets, still indicating Britain’s access to the ‘lucrative’ multi-trillion dollar market will be cut after that.
And Paris, although still smaller than London is stretching its lead over Frankfurt and Amsterdam in the race to lure UK-based banks looking to set up outposts in Europe. A French regional development agency said 5,500 financial services jobs had been created or relocated in Paris since Brexit.
Northern Ireland
The Windsor framework, a revised version of the Northern Ireland protocol, is about to get real for the people of Larne as work begins on a new border inspection facility. Building work is expected to take 30 months to complete with a finishing date of May 2026. Larne, along with Belfast and Warrenpoint harbours were all supposed to get upgraded inspection facilities to carry out new border checks when the Brexit deal was implemented in 2021.
Ards and North Down council has been given a £55,000 grant by the Office for Product Safety and Standards at Stormont as part of a package offered to help all councils in Northern Ireland fund extra staff posts for a range of activities on non-food products, including those required as a result of the new Irish Sea border regulations.
Energy
An industry lobby group with 100 members, Energy UK, says the UK government’s emissions trading system (ETS) has already cost the Treasury £1bn over the last six months and could, if low carbon prices persist, eventually cost £3bn a year in lost tax revenue. The problem stems from the disparity between the carbon price on the UK’s ETS and its EU equivalent. Energy UK is urging ministers to link the two schemes – as other jurisdictions, such as Switzerland, already do.
Environment
Campaigners are worried that UK government plans to diverge from the EU’s standards for monitoring water quality in England will lead to even more pollution in England’s rivers. The Guardian has been told the EU’s water framework directive (WFD) will no longer be used, making it more difficult to compare the state of the country’s rivers against those in Europe.
Hospitality
Britain’s hospitality sector has been hard hit by Brexit as we know, exacerbating a trend that started twenty years ago, according to a survey by the trade body UKHospitality, in conjunction with the research agency CGA.
The sector has declined by nearly a third since 2003. Karl Chessell, CGA’s director for hospitality and food, said:
“These figures show the steady contraction of Britain’s licensed premises over a 20-year period and that has accelerated in recent years with the triple whammy of Brexit, COVID and spiralling costs.”
Retail
London’s upmarket retailer Fortnum & Mason has announced a resumption of its online service for EU clients, suspended due to post-Brexit customs challenges. This however has been achieved at the expense of establishing a distribution hub in Belgium.
The report does not indicate if or how many jobs have been created in the EU but I assume there must have been some.
Upsides
Finally, another upside. DEFRA has announced that a 2021 market access deal with Japan, delayed by an avian influenza outbreak, will soon come into force. It will mean UK farmers, processors and suppliers are able to export fresh and cooked poultry meat into the Japanese market.
The industry estimates that this market could be worth over £10mn in the next five years. UK exports to Japan were worth around £6 billion in 2022, so an increase of about 0.15%.
Minister for International Trade Nigel Huddleston said: “This is a significant win for British poultry farmers and producers who can now export their top-notch produce to this vast and lucrative market.”
