By Michael Dembinski
Figures released by the Office of National Statistics last week indicate that the UK’s balance of trade in goods has deteriorated significantly compared to pre-pandemic and pre-Brexit levels. The data, for the first 11 months of 2021, shows that the value of goods exported by the UK fell by 13.7% compared to the same period in 2019. Meanwhile, the value of goods imported by the UK rose by 3.8% (again comparing Jan-Nov 2021 with Jan-Nov 2019). This has resulted in the UK’s balance of trade in goods rising by 42.9% between Jan-Nov 2019 and Jan-Nov 2021.
Traditionally, the UK has paid for a large trade deficit in goods with a large trade surplus in services. However, the UK’s largest export market for services was the EU, which accounted for 39% of the value of all services exported in 2019. The UK had recorded a trade surplus in services with the EU every year from 2003 to 2020. We won’t have the full picture from 2021 until the ONS publishes the Pink Book in late October, so the full impact of the UK’s first year outside the single European market on trade in services won’t be known for a while.
So – who’s doing well out of trading in goods with the UK post Brexit? The value of goods imported from China in the first 11 months of 2021 rose by 32.7% compared to Jan-Nov 2019. From Russia, they rose by 16.4% comparing the same periods. Meanwhile, the value of UK imports from the EU fell by 18.0%, from the USA by 17.9%, and from Japan by 28.3% (again, Jan-Nov 2021 compared to Jan-Nov 2019).
But are the Chinese at least buying more goods from the UK? Not so. Again, comparing Jan-Nov ’19 to Jan-Nov ’21, the value of UK exports to China fell by 33.0%. As a result, the UK’s trade deficit in goods with China has more than doubled.
Turning now to the UK-Poland trading relationship, it remains clear that Brexit has hurt UK exports to Poland far more than Polish exports to the UK. Again, comparing the first 11 months of 2021 with the analogous period of 2019, we can see from ONS data that the value of Polish goods exported to the UK has fallen by 9.5% (from £10.2 billion to £9.2 billion). Meanwhile, the value of British goods exported to Poland has fallen by 25.5% (from £5.0 billion to £3.7 billion).
The graph below shows the monthly fluctuations in trade flows; the first vertical grey bar represents the March 2020 lock-downs. The second vertical bar shows the effect of stockpiling towards the end of the Brexit transition period, when the value of Polish exports to the UK reached a record level of £1.1 billion in the month of December 2020. The third bar shows the catastrophic impact of Britain’s sudden departure from the single European market, just seven days after the signing of the Trade and Cooperation Agreement with the EU.
The next ONS data release concerning the UK’s trade in goods appears on Friday 11 February, and will encompass the whole of 2021.
However, the March data release will be awaited with great anticipation, as it will show the effect that the latest Brexit measures implemented by the UK government on 1 January 2022 will have had on trade in goods with the EU in January. Full customs declarations, pre-lodgement of cross-border goods-vehicle movement and some phytosanitary controls came into force with the New Year. Anecdotal evidence, such as long queues of lorries at the Channel ports and empty supermarket shelves, suggest that disruption to trade may have been severe, though not as harmful as the effects felt by UK exporters of goods as the EU began treating UK goods as coming from a third country on 1 January 2021.
Majority of UK entrepreneurs say Brexit brings no benefits
An interesting survey was published by London newspaper City A.M. on 17 January; the nationwide survey of UK entrepreneurs conducted for One World Express shows that nearly one in three business owners fear their company will close before the end of this year, primarily as the long-term effects of Brexit start to bite. Brexit continues to be a real obstacle, with 73% of entrepreneurs saying that their business has not seen any benefit at all from the UK’s departure from the EU. A quarter of UK businesses were ‘significantly impacted’ by Brexit last year; one in three respondents said their company experienced difficulties when attempting to secure working visas for EU-based employees, while 43% faced supply-chain disruption. One business out of every four surveyed has taken a ‘conscious decision’ to cease importing from or exporting to the EU in 2021.
Monthly ONS dataset – UK Trade in Goods All Countries – spreadsheet for download available from the ONS website – https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/datasets/uktradeallcountriesseasonallyadjusted
Monthly ONS data regarding value of UK export of goods to Poland – https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/timeseries/erdr
Monthly ONS data regarding value of UK imports of goods from Poland – https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/timeseries/ered
(The 11 February release and each subsequent release of the above will also be available from this address, which stays the same.)
Statistics on UK-EU Trade, Matthew Ward, House of Commons Library, December 2021 –
‘One in three UK business owners fear their company won’t exist anymore in a year as Brexit onslaught intensifies’ – City AM: https://www.cityam.com/one-in-three-uk-business-owners-fear-their-company-wont-exist-anymore-in-a-year-as-brexit-onslaught-intensifies/?utm_source=dlvr.it&utm_medium=twitter