Britain’s goods exports are lagging all other G7 economies, according to an analysis by the Financial Times, which trade experts said provided more evidence of the impact of Brexit.
Quarterly figures published by the Office for National Statistics in March showed that in the last three months of 2022, UK export volumes, excluding precious metals, were more than 9 per cent below the 2019 pre-pandemic average.
Analyses by the Bank of England and the Office for Budget Responsibility, the UK fiscal watchdog, show that the country’s exports may be even weaker, with the OBR predicting that the underperformance will continue for the next two years.
Sophie Hale, trade economist at the Resolution Foundation think-tank, described the UK’s performance as “a disaster”. The drop in goods export volumes marked “a quite substantial fall and it really leaves the UK at the bottom of the G7 pack”, she added.
The ONS data shows the UK had the weakest export performance in the G7, and compares with double-digit rises in Italian and Japanese exports, 4 per cent growth for the US and 2 per cent for Germany.
The findings come as the IMF predicted that the UK economy would be the worst performing in the G7 in 2023, contracting by 0.3 per cent.
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Business leaders have complained that red tape and other post-Brexit obstacles to trading with the EU have left UK companies at a disadvantage and not enough has been done to address the problems.
Emma Rowland, trade policy adviser at the Institute of Directors, a leading business group, said that following the reopening of the economy after the coronavirus lockdowns, UK exports had been “sluggish” in comparison with other top economies.
“It is clear that Brexit has had the largest influence over businesses’ exporting strategies, having created barriers to trade and also increased competition from EU-based firms,” she added.
Using recent trade figures to assess the impact of Brexit has been made more difficult by several factors.
Last year’s UK export data was inflated by the strong growth in precious metals trading, which Hale said offers “little economic benefit”. In line with the ONS’s practice, the FT analysis excluded precious metal trading, which is highly volatile. Other G7 countries are not large traders of precious metals.
The figures were also complicated by discontinuities in collecting trade data with the EU since 2021 and double counting of imports in the first half of 2022.
Yet Hale said the figures were “not so murky” as to be inconclusive, and that it was “still possible to see that there is a clear Brexit impact in the trade data”. She added that supply chain disruptions, low business sentiment and the stagnation of business investment since the Brexit referendum might also be affecting the country’s trade performance.
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Earlier this year, the BoE adjusted the official data by allowing for the double counting and the discontinuities. It concluded that trade volumes had been “weaker than implied by the official data since January 2021”.
“These adjusted trade figures are also weaker than previously expected, suggesting that the impact on trade [from Brexit] has occurred somewhat more quickly than previously estimated,” the central bank said.
In a similar exercise last month, the OBR found that overall trade volumes were 3.4 per cent lower than the ONS figures.
The OBR report found that overall UK trade was below that of the other big industrialised countries despite services, which account for about half the country’s overall exports, performing better than goods. In the last three months of 2022 UK services export volumes were 2.4 per cent above their 2019 level.
The OBR expects the weakness in the UK overall trade to continue for the next two years, with export volumes forecast to fall by 6.6 per cent in 2023 and by 0.3 per cent in 2024.
“Weak growth in imports and exports over the medium term partly reflects the continuing impact of Brexit, which we expect to reduce the overall trade intensity of the UK economy by 15 per cent in the long term,” it stated.
Source: Economy - ft.com
