Brexit and its Economic Consequences
The first signs of trouble posed by the UK’s transition to a new, less open trade relationship with the European Union are evident in recent economic reports..
While the COVID-19 pandemic remains the biggest concern for many companies, recent polls show Brexit is increasing the pressure on the economy..
Manufacturers and service companies have been hit hard by supply chain disruptions and export difficulties, according to IHS Markit..
UK factories reported the sharpest increase in delivery times for suppliers according to six preliminary purchasing managers index (PMI) surveys published by IHS Markit last week for France, Germany, Japan, Australia and the US, as well as the UK.
«This was almost exclusively due to both Brexit and international disruptions.», – stated in IHS Markit.
Trade between the UK and the European Union remains free of trade duties and quotas, according to a deal last month, but a full customs border means goods now have to be checked and filled with paperwork..
In a statement that angered many business owners, the Prime Minister Boris Johnson described the failure as «emerging problems», compounded by the COVID-19 pandemic.
Trade experts believe that some additional costs and bureaucracy will become permanent co-factors. Brexit supporters say Britain will benefit in the long run by making its own trade deals and setting its own rules outside the EU.
Wednesday Chief Economist of the International Monetary Fund Gita gopinath said the impact of Brexit in the first quarter of 2021 is likely to lead to a reduction in British economic production by about 1%.
Service companies, which make up the bulk of the UK economy and generate trade surpluses with the EU, have been hit particularly hard this month, according to a study by IHS Markit..
Service exports in the UK have deteriorated faster than any of the six PMIs released this month, contradicting the overall improvement trend seen in most other countries..
«The service industry was hit hard by trade restrictions and consumer spending cuts earlier in the year», – IHS Markit experts say.
A more accurate picture of the losses and benefits of Brexit is likely to become clearer over time, although many areas of the UK economy are not encouraging.
A Confederation of British Industries poll released last week found British manufacturers’ confidence in their ability to compete in the EU market fell to its lowest level in 20 years..