Brexit, year I: the British economy collides with reality

By : ujikiu / On : 20/12/2022

The Global Britain (Global Britain) dreamed of by Boris Johnson, finally freed from the “chains” of the European Union to become a new international commercial actor, ended 2021, the first year of Brexit without conditions, grudgingly begging for community truckers to come to work in the UK. Among other things, to refuel petrol stations, where hundreds of British drivers had been forced to queue for hours.

The pandemic knows no exceptions, and the United Kingdom was forced to respond to a historic threat with the same acceleration in public spending as the rest of the European countries. The comeback of the crisis, however, which could have been more advantageous due to the economic characteristics of the country, was slowed down by the problems arising from an exit from the EU for which many companies, tasked with surviving the coronavirus, did not have time to prepare, nor resources or legal guidance to do so.

The year 2021 has been one of transition in many ways. The pandemic slowed down international trade for the first half and softened the effects of Brexit. And the British government introduced flexibility into many of the customs controls on products imported from the EU. As of January 1, 2022, although some sanitary and phytosanitary security controls for agricultural products have been extended again for a few months, customs declarations will have to be settled in advance. 50.3% of the businessmen consulted by the UK Institute of Exports and International Trade (IOE&IT, in its acronym in English) show their lack of confidence that this transition will be carried out without problems. "Last year was one of adaptation for all those British companies that trade with the EU, and in the last 12 months they have been gaining confidence in these exchanges again, but because they have been able to start receiving training and education," says Marco Forgione, CEO of IOE&IT.

There is a consensus among economists that Brexit has been too heavy a backpack, at the wrong time. No one is yet able to predict with certainty what its impact—negative or positive—will be on the economic future of the country. The Office for Budgetary Responsibility (OBR) has estimated the negative impact on GDP that Brexit will have in the long term at 4%. “For comparison, we believe that the impact of the pandemic will add another two percentage points to economic growth,” said Richard Hughes, director of the OBR, at the end of last October.

No one is able to accurately define that “long term”, but there is no arguing that leaving the EU has added a number of disadvantages to the British response to the crisis. Under normal conditions, the United Kingdom, with an informed citizenry and accustomed to the rules of the economy —capable of understanding, no matter how much pain it causes their pockets, that excess demand triggers the price of gas or electricity—, and With a flexible and agile market, it was in a position to have been one of the best countries to respond to the crisis and emerge from it.

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Mediocre results

The revolution in its international trade structure that Brexit has brought about and a new immigration policy fraught with ideology and little common sense they have made the country obtain mediocre results and be in the pack of the rest of the western economies. The Organization for Economic Cooperation and Development (OECD) forecasts GDP growth of 4.7% for 2022, and 2.1% for the following year. The forecast for Spain, for example, is 5.5% and 3.8% respectively. This 2021, the United Kingdom will end up growing, according to that same organization, by 6.9%, compared to 6.8% in France, 5.6% in the United States or 5.2% in the euro zone. “Stuck, instead of skyrocketing”, was the diagnosis of the British economy made in its autumn report by the National Institute for Economic and Social Research (NIESR, in its acronym in English). “The short-term supply problems facing the UK are going to persist, and will most likely be exacerbated by Brexit. Our departure from the European Union has caused a reduction in the labor market, has decreased the investment levels of companies and has caused some contraction in our commercial sector”, says the director of the NIESR, Jagjit S. Chadha.

During the lengthy lockdown of 2020 and part of 2021, around 1.2 million migrants left the UK, according to the Office for National Statistics. Many of them were EU citizens who decided to return to their land with their families, rather than squander their savings in a tightly closed country that offered them no job opportunities. A large part of them renounced starting the procedures that regularized their situation, the so-called EU Settlement Scheme (EU Settlement Scheme), a process that has come to take advantage of almost six million community citizens residing in British territory.

Brexit, Year I: The British Economy Face to face with reality

For all those who did not, the return, once the pandemic was over, was banned. The UK Home Office, led by a woman with a reputation for toughness and a strong supporter of Brexit, Priti Patel, had approved, almost as soon as Johnson arrived in Downing Street, a new immigration law that ended freedom of movement of people from the EU and tightened the conditions for entry into the British labor market. Who would have imagined that the labor shortage with which the world began to emerge from the coronavirus crisis, in the face of a huge global warming of demand and a "great resignation" that had caused many people to abandon the toughest jobs , repetitive and lower paid, would multiply the problems in the UK, which faced such a constrained situation with both hands tied behind its back.