AS I SEE IT: Research from the LSE was not so damning about Brexit as the SNP would have us believe, says TERRY MURDEN
Boris Johnson’s botched Brexit deal is causing “untold misery” to businesses across the UK, according to the SNP, basing its gloomy prognosis on a new report which it says has “exposed the depth of the decline caused by leaving the EU.” Well, that’s one interpretation of the report from the Centre for Economic Performance, a unit of the London School of Economics. In fact, it is not quite so damning, and certainly makes no mention of “untold misery”.
There is no doubting that Brexit has been a shock to the system and a setback to many traders, as acknowledged by the researchers, but their findings are a little more nuanced than the SNP’s summary which, let’s face it, is based on pre-judged party mantra that Brexit has been a bad thing, whatever academic research and official data might say.
The CEP’s paper focuses on how Brexit has affected the UK’s trade with the EU relative to the rest of the world, in particular the changing relationship with the EU after the post-Brexit Trade and Cooperation Agreement (TCA) and the readjustments that companies have been forced to make. It found that many smaller firms stopped trading with the EU, while – more surprisingly – the UK stopped selling a lot of products to smaller countries in the bloc.
What the researchers found most surprising was that in the first year of the TCA, imports from the EU fell by 25% relative to imports from the rest of the world. This indicates that UK firms switched to domestic or non-EU suppliers.
SNP supporters may choose to skip over the second paragraph of the crystallised media statement which states: “In contrast, there is no evidence of a sustained decline in relative UK exports to the EU after 1 January 2021, when the UK and the EU began trading under the Trade and Cooperation Agreement (TCA).”
Thomas Sampson, one of the co-authors, admits that the changes in the trading relationship “make the UK a harder place to do business” – a verdict that few would challenge. But the paper’s conclusion is that once trade costs began to rise as a result of the TCA, firms “started to quickly reorganise their global input sourcing away from the EU while seemingly more gradually adjusting their export sales.”
The paper’s authors conclude: “Although UK exports to the EU fell sharply at the start of 2021, they
subsequently rebounded and our results do not show a persistent negative effect of the TCA on export
values.”
They note that “the finding that the TCA had a greater effect on imports than exports in 2021 is surprising,
particularly since the UK delayed the introduction of many customs checks until 2022.
And in a statement that could have been written for anti-Brexiteers, it states: “We caution against drawing premature conclusions about the long-run trade effects of Brexit. Our results only cover the first year of the new UK-EU trade relationship, and trade data can be noisy in the short-run, a concern that has been exacerbated by volatility in trade resulting from the Covid-19 pandemic.”
Ah, the pandemic. It barely gets a mention, though clearly it had an effect on trade, particularly in that first year after Brexit, and will presumably be the subject of further research.
tmurden@dailybusinessgroup.co.uk
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business
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