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London
CNN
—
It has been two years since former Prime Minister Boris Johnson triumphantly declared Britain to be ‘prosperous, dynamic and happy’ after signing the Brexit trade deal and completing its exit from the EU.
Johnson said the Brexit deal would allow British companies to “do more business” with the European Union, allowing the UK to enter trade deals freely around the world, while the 450 million You can continue to seamlessly export to the EU market, which has millions of consumers.
In reality, Brexit is dragging down the UK economy, which remains the sole member of the G7 — a group of advanced economies that includes Canada, France, Germany, Italy, Japan and the United States — whose economies are more vulnerable than before. It’s getting smaller. Pandemic.
Years of uncertainty over future trade ties with the UK’s largest trading partner, the European Union, have hit business investment, leading to a trade deal between the UK and the EU that has been in place for nearly two years. Business investment in the third quarter was 8% below pre-pandemic levels, despite the .
The pound crashed, making imports more expensive, fueling inflation and failing to boost exports, even as the rest of the world enjoyed a post-pandemic trade boom.
Brexit has created trade barriers for British and foreign companies that used the UK as a European base. It burdens imports and exports, restrains investment, and contributes to labor shortages. All this exacerbates the UK’s inflation problem, hurting workers and the business world.
“Brexit is the most plausible reason why the UK is doing worse than the rest of the world,” said L. Alan Winters, co-director of the Center for Inclusive Trade Policy at the University of Sussex.
The gloom in the UK economy is being caught by striking workers as the worst inflation in decades erodes their wages. At the same time, governments are cutting spending and raising taxes to fill holes in the budget.
Brexit is not the cause of the UK’s cost of living crisis, but it makes the problem more difficult to solve.
“The UK chose Brexit in a referendum, but the government has since opted for a particularly difficult form of Brexit that maximizes the economic costs,” said Michael Saunders, a senior adviser to Oxford Economics and a former Bank of England official. I did,” he said. “The hopes of a Brexit recovery are all but gone.”
The UK voted to leave the European Union in June 2016, but leaving the single market and customs union was finally agreed on 24 December 2020, with both sides finally We agreed to a free trade agreement.
The Brexit Agreement, known as the Trade Cooperation Agreement, entered into force on 1 January 2021.
Tariffs on most commodities have been eliminated, but many non-tariff barriers have been introduced, such as border controls, customs inspections, import duties, and health inspections for animal and plant products.
Before Brexit, Kent farmers could send truckloads of potatoes to Paris as easily as they could to London. Those days are over.
Michelle Ovens, founder of Small Business Britain, said: , campaign group.
“The last two years have been very bad for small businesses,” Ovens told CNN.
Researchers at the London School of Economics estimate that the types of British goods exported to the EU fell by 30% in the first year of Brexit. They said this was likely due to a small exporter pulling out of his small EU market.
Take Little Star, a British company that makes jewelry for children. The business started in the Netherlands, with plans to then expand to France and Germany. But since Brexit, only two of her more than 30 clients in the Netherlands are ready to handle the costs and paperwork to acquire shares from the company.
According to Rob Walker, who co-founded the business with his wife Vicky in 2017, products that took two days to ship now take three weeks, and import and sales taxes are increasing competition from European jewelers. much more difficult. The company is now looking to the US for growth opportunities.
“It’s so hard to do business with people 30 miles away, so why should you look to the other side of the Atlantic to do business?” Walker said. rice field.
A British Chamber of Commerce survey of more than 1,168 businesses released this month found 77% said Brexit had not helped them increase sales or grow their businesses. More than half say they find it difficult to adapt to new rules for trading commodities.
Dorset manufacturer Siteright Construction Supplies told the Chamber of Commerce that importing parts from the European Union to repair broken machinery has become an expensive and “time-consuming nightmare”.
According to Siteright, “Brexit was the biggest imposition of bureaucracy on business yet.”
Nova Dog Chews, a maker of dog snacks, says it would have lost all of its EU business had it not set up a presence on the block. “This has cost our business a lot of money. We could have invested in the UK without Brexit,” he added.
A British government spokesperson told CNN that the government’s export assistance service provided exporters with “practical assistance” in implementing the Brexit deal. The deal is “the world’s largest zero-tariff, zero-quota free trade agreement,” the spokesperson added. “This will ensure access to the UK market across key service sectors and open up new opportunities for UK businesses around the world.”
The UK will not easily regain what it has lost by losing unfettered access to the world’s largest trading bloc.
Since leaving the European Union, only Australia and New Zealand have entered into substantial new trade agreements rather than simply rolling over deals they had signed as EU members. The government’s own estimates indicate that these would have a negligible impact on the UK economy, adding only 0.1% and 0.03% to GDP respectively over the long term.
By contrast, the UK Budget Responsibility Office, which makes economic forecasts for the government, expects Brexit to reduce UK output by 4% over 15 years compared to staying within the block. Imports and exports are projected to decline by about 15% in the long term.
Initial data support this. According to OBR, UK merchandise exports to the EU in the fourth quarter of 2021 were 9% lower than he was in 2019, while imports from the EU were down 18%. Merchandise exports to non-EU countries fell by 18% from 2019.
The OBR said in its March report that the UK “appears to be a less trade-intensive economy, with trade as a share of GDP down 12% since 2019, 2.5 times higher than the rest of the G7. there is,” he said.
According to Jun Du, professor of economics at Aston University in Birmingham, declining exports to non-EU countries are making UK companies less competitive in the face of rising supply chain costs post-Brexit. may indicate .
“Britain’s ability to trade is permanently impaired [by Brexit]’” Du told CNN. “It doesn’t mean we can’t recover, but we’re set back for years.”
A study by the European Reform Center, a think tank, estimates that in the 18 months to June 2022, the UK’s trade in goods will be 7% lower than it would have been had the UK remained in the EU.
Investment is 11% weaker, GDP is 5.5% smaller than before, and £40bn ($48.4bn) of tax revenue is being put into the economy annually. This is enough to cover three-quarters of the spending cuts and tax increases UK Finance Minister Jeremy Hunt announced in November.
The UK is projected to have the worst economic performance among developed countries next year.
The Organization for Economic Co-operation and Development expects the UK economy to contract by 0.4%, ahead of sanctioned Russia. Germany’s GDP is projected to be 0.3% smaller than she is.
The International Monetary Fund forecasts UK GDP growth of just 0.3% next year, with only Germany, Italy and Russia expected to contract.
Both agencies say high inflation and rising interest rates will weigh on UK consumer and business spending.
The decline in private sector activity accelerated in December and is now the fifth straight quarter of decline, according to the Confederation of British Industry, a major business group.
CBI Chief Economist Martin Sartorius said in a statement that the downward trend “looks to deepen” in 2023.
“Businesses continue to face a number of headwinds, with rising costs, labor shortages and weak demand weighing on the outlook for next year.”
— Julia Horowitz contributed to this report.
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