It has been three years, since the UK left Europe.
There has been a pandemic since then, which was quickly followed by an energy crisis.
It has been difficult to determine exactly the impact of Brexit.
According to recent data, there has been a slight dip in the economy. However, this is not surprising.
The UK pulled out from the single market and customs Union in 2021. Companies trading with the EU were subject to new rules, paperwork, and inspections on certain goods.
Fears arose about what would happen to the PS550bn in trade between the UK, and its closest trading partner.
The initial drop in exports from the UK to the EU was noticeable. Official figures show that trade volumes have returned to pre-pandemic levels after teething issues were resolved. It is possible to argue that trade could have grown more if Brexit hadn’t occurred.
The British Chambers of Commerce recently surveyed 500 companies and found that more than half of them were still struggling with the new system. Some small exporters may not have been able to make it through the red tape. An analysis of customs classifications reveals that the range of goods we export has decreased.
Imports are experiencing a similar trend. Volumes have returned to pre-pandemic levels. The London School of Economics points out that food imports from the EU, such as tomatoes and potatoes, rose by up to 6% between 2020 and 2021. This was before the recent rise in inflation.
However, this has also made it easier to compete for domestic food producers; economists believe they may have received a PS5bn boost.
The bigger picture is what is most eye-catching, but it is not the smaller one.
At the height of pandemic, international trade saw a collapse in most countries. The rest of G7 countries have seen their trade rebound in a manner that is unlike what has happened in the UK.
The UK’s trade with other countries and the EU has declined relative to its size. It has not been as successful in contributing to our economic prosperity post-pandemic. Global Britain has become less open. It is in the back.
What about trade agreements? They might be able to help, but it’s still early days.
There have been 71 trade agreements, which is a rapid progress but most of them are just copies of deals Britain had as a member of the EU.
New deals have been signed by the UK with Australia and New Zealand, but only a small boost to trade is expected. Even that could take many years. They are controversial and some UK farmers fear that they will be left behind.
Still, talks are ongoing with India and other members of the trans-Pacific pact. Although they are taking longer than expected, analysts believe that slower negotiations could lead to better agreements.
It is still difficult to reach trade agreements with some of the largest players like the US and China.
Our relationship with the EU also affects how much companies spend on training, technology and factories. The chancellor also acknowledges the importance of investment in boosting growth.
However, investment has stagnated since the referendum as businesses remain cautious about the economic outlook. Although investment was not great before 2016, analysis by The UK in a Changing Europe suggests that it could have been 25% higher if it continued its pre-referendum trend.
Economists debate how to explain this gap. The International Monetary Fund and others have suggested that the uncertainty surrounding Brexit, which includes the unresolved Northern Ireland Protocol issue, has deterred some spending. Sir Richard Branson is one of the business leaders who suggested that Brexit red tape would discourage them from investing in the UK.
Briefings for business, a pro-Brexit group claims the numbers are misleading and there is no evidence of investment losses due to Brexit.
However, we are ultimately a less efficient and lower-earnings economy because we lack investment.
Some have complained that the EU’s departure meant changes in the rules for the free movement and employment of workers, as well as the introduction of a points-based system of immigration.
Next’s chief executive, Lord Wolfson, and Wetherspoons boss Tim Martin supported Brexit. However, both have called on the UK to allow more workers in.
According to the think tanks Centre for European Reform and UK In a Changing Europe, there is 330,000 fewer workers in Britain as a result. This may not be the entire workforce, but certain sectors like transport, hospitality, and retail have been especially hard hit.
The shortage of workers has led to a rise in customer bills and resulted into a shortage.
Some commentators believe these constraints will encourage businesses to invest more and increase their staff’s skills.
According to a House of Commons Report, 7,000 jobs in the financial sector may have been lost. However, this is far less than the 70,0000 that was previously believed.
All of this adds up to an economic system that has performed less well in the face of recent turmoil than its peers. The UK is the only large rich country that is still smaller than before the pandemic. Brexit could be a factor.
Overall, the Office for Budget Responsibility (the government’s independent watchdog) believes that the UK will end up being 4% worse off than it would be if it had voted to leave. However, for many voters, Brexit was more about sovereignty and not the economy.
There is still much to be done.
It includes the Northern Ireland Protocol, as well as permanent arrangements for certain industries, such as financial services and fishing, electric vehicle parts, science cooperation, and ways to cut down on red tape.
Realizing these potential benefits is an economic and political matter.