The impact of Brexit on the British economy

By Ollie Campbell

"Banksy does Brexit" by dullhunk

Despite the pro-Europe 'Project Fear' campaign, Brexit Britain has paid off so far.

 

Since 2016, a massive worry for firms all across the UK has been what the effects of Brexit will mean to them. However, as Britain successfully departed from the transition phase on 31 December there was not the disastrous crisis that many Remainers were adamant would occur. Even during the increasing impediment caused by the pandemic, there was no border disruption with long lines of lorries, supermarkets have not been wiped out of produce and it is palpably clear that most UK businesses have other things on their minds at this current time.

 

It is safe to say that Covid-19 has taken priority over Brexit to many across the country. The third national lockdown has led to a further £4.6 billion package of grants for firms that require support, and the job retention scheme is still offering to pay 80% of employees’ wages who are unable to work through the lockdown until at least the end of April. The national GDP should not shrink as much or as fast as it did during April 2020 due to more companies able to work from home, more online retailers, and restaurants/cafes able to provide a takeaway service. Although, with schools closed many parents are unable to work or have been forced to work shorter hours to meet childcare requirements. It will be interesting to see the impact of this third lockdown on the economy in relation to the first and second.

 

Nonetheless, even with most people preoccupied with the pandemic, Brexit is still proving vexatious through this period of increased bureaucracy where many rules and laws are being altered. New tax rules replacing VAT have caused several European businesses to halt shipments to the UK altogether. But with the UK being the largest global importer of EU goods, this could prove fatal to many as the UK is relied on as an important customer. As a whole, imports and traffic into the UK have operated effortlessly along the Dover-Calais route. The Government has warned hauliers that delays could increase as the magnitude of shipments rise and the EU try to enforce tighter restrictions.

 

The successful trade deal produced by Boris Johnson promised no tariffs or quotas on goods being imported to the UK, much to the satisfaction of both traders and British customers. Although to qualify for these benefits, companies have to validate that approximately 50% of any exported goods derives from the UK or EU. This seems exemplary as the global import trading barriers of the EU no longer have to be followed by the now independent UK. However, distribution hubs are now massively disrupted by the lack of guarantee of the source of the products. The need for rules-of-origin checks flows directly from the Government’s quitting of the customs union and single market, but surely big companies should have been prepared for this even if small companies were not?

 

Further talks with the EU could produce some welcome derogations or longer exception periods from the toughest imposing checks, but the possibility that Brussels will weaken its rules for the UK is unlikely. The focus of the EU is on Northern Ireland to avert a hard border on the Irish isle. Both sides have agreed to a border between Britain and Northern Ireland where the customs union is still active across the whole island. The convolution of this customs union arrangement has caused some businesses to stop trading or reduce their product ranges between Britain and Northern Ireland. Northern Irish supermarkets are turning to the Government for help in sustaining their shops across the canton.

 

It is very clearly apparent that the largest hit to the economy from Brexit is not going to hit in the style that the Remain campaign suggested leading up to the referendum. The reasoning for this lies mostly on the last-minute trade deal victoriously accomplished by the British Government. Immediate short-term chaos has been avoided for both the UK and the EU. The Bank of England has predicted that the economy will be ‘three or four percentage points smaller in ten years’ but Brexit has already provided many unpredicted gains and no doubt it will provide many more for the UK in our future as a self-reliant nation. 


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