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An Amusing Look at Brexit Scare Stories vs What Actually Happened

Summary:
The phrase "early days" should apply before crowing.... Official UK figures in March showed the UK recorded a record fall in trade with the EU in January, as the economy struggled with post-Brexit rules and the pandemic. Goods exports plunged by 41% and imports by 29% as the UK's departure from the EU's single market had a major impact, as did additional bureaucracy and sometimes unexpected costs and taxes. Nearly a quarter of small UK firms surveyed said they had temporarily halted sales with the EU because of post-Brexit rules, according to a report by the Federation of Small Businesses in late March. Figures released on March 18 by Ireland's Central Statistics Office said imports from Great Britain fell by 65% in January compared to a year earlier. Recent German figures showed imports

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The phrase "early days" should apply before crowing....

Official UK figures in March showed the UK recorded a record fall in trade with the EU in January, as the economy struggled with post-Brexit rules and the pandemic.

Goods exports plunged by 41% and imports by 29% as the UK's departure from the EU's single market had a major impact, as did additional bureaucracy and sometimes unexpected costs and taxes.

Nearly a quarter of small UK firms surveyed said they had temporarily halted sales with the EU because of post-Brexit rules, according to a report by the Federation of Small Businesses in late March.

Figures released on March 18 by Ireland's Central Statistics Office said imports from Great Britain fell by 65% in January compared to a year earlier. Recent German figures showed imports from the UK dropped by 56%, while exports were down by nearly a third.....

....A UK parliamentary report on March 23 notes that UK food producers are facing new trade barriers with the EU in the form of health measures, extra paperwork, higher haulage costs and some "outright export bans"...

....An analysis published on March 23 by the UK Food and Drink Federation of a 75% fall in exports to the EU in January -- salmon collapsed by 98%, beef 91% -- cited COVID-19 and stockpiling. But it said much was "likely due to new non-tariff barriers". The FDF added that the "collapse in groupage movements" -- where different companies send goods in the same load -- had hit small and medium-sized firms in particular.

"Dismissing trade disruption at the borders as simply short term ‘teething problems’ is no longer credible," says a Brexit Impact Report by the British Meat Processors Association. "British meat companies are painting a very different picture. They are reporting systemic weaknesses in the current export system, mountains of red tape and a potential permanent loss of trade of between 20 and 50 per cent.".....

...Deadlock over fishing rights was one of the main obstacles in post-Brexit trade negotiations, with the EU pushing to retain access to UK waters while London insisted on "taking back control".

But the deal brings many "long-term" barriers, the Lords report says, dismissing the government's description of early problems as temporary.

The impact of new demands for customs declarations and other paperwork hit UK exports immediately. Delays saw catch values halve and often made fresh fish shipments unviable.

UK environment minister George Eustice told a committee of MPs on March 25 that the EU's ongoing ban on the imports of live shellfish was unlikely to change. UK producers have been unable to sell mussels, oysters and scallops to the bloc -- and have been told to invest in purification material or seek new markets for frozen shellfish.

...There was huge relief in the car industry on both sides of the English Channel when the Brexit trade deal was sealed, keeping the EU-UK market free of tariffs and quotas. A grace period over rules of origin -- delaying a requirement to declare where parts come from -- has also been welcomed, although this is due to expire at the end of 2021.

However, concern over the impact of non-tariff barriers on supply chains continued into the new year. "That does not mean zero cost," Mike Hawes, CEO of the Society of Motor Manufacturers and Traders (SMMT) told a House of Commons committee on February 23.

"I would characterise all the industry as paddling furiously below the water to keep things going," he went on. "In terms of general day‑to‑day operations, moving parts in and out, it is difficult. The administration is significant... This is the new normal; we accept that. Ensuring the entire complexity of the supply chain can continue to operate is a major challenge."...

Paul Everitt, Chief Executive of the ADS Group, had a similar message concerning aerospace and defence. Companies were experiencing "a day‑to‑day battle to make the new arrangements work and to find their way through this," he told the committee, citing delays and extra transport costs.

He added that key parts of the industry "are not able to do business, and some of them are actually losing business", because of uncertainty over the future EU-UK relationship on aviation safety and regulation.

British manufacturers reported a near-record increase in supply chain disruption and rising costs, attributed to Brexit and the pandemic, in an IHS Markit/CIPS survey carried out in February.

"This disorder was primarily created by shipping delays, transportation shortages and customs border commotion. Though it was difficult to see clearly where COVID disruption ended and the Brexit muddle began," said Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply....

...The UK has unilaterally waived batch testing requirements for products coming from the EU for two years. But the EU is still imposing testing on medicines going the other way.

The Association of the British Pharmaceutical Industry (ABPI) has warned that this results in repeated testing "that complicates the supply chain and can delay the batch of medicine reaching patients for an average of 6 weeks and costs £1,500 per batch"....

...The Brexit deal contained only vague commitments on services and left financial services to a separate process.

The UK and the EU have reached a "memorandum of understanding" -- as had been expected by the end of March -- on future cooperation. It's thought it could help City of London firms regain some access to the EU lost when the UK left the EU's single market.

However, this goes nowhere near returning the full "passporting rights" giving blanket access to EU markets. And a decision on the lesser form of access -- given when the EU accepts a third country's regulation to be "equivalent" to its own -- rests in the hands of Brussels.

The immediate post-Brexit period in 2021 has seen a flight of share trading activity from the UK into the EU, while since the 2016 Brexit referendum hundreds of UK-based financial firms have moved at least some operations to the bloc....

Mike Shedlock
Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

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