The pandemic distracted everyone from the harsh reality of Brexit’s likely effect on UK trade. But now the impact of leaving the Single Market and Customs Union is starting to become clear.
Official German trade data shows that the UK is poised to drop out of the list of Germany’s Top 10 list of trading partners for the first time since 1950:
- The UK was in 5th position before the referendum in 2016
- By last year it had already fallen to 9th place
- And data for the first half of this year shows a further decline to 11th place
As Reuters reports, German companies are moving to source goods from other EU suppliers, rather than the UK, due to the end of frictionless trade and free movement of people:
“”More and more small and medium-sized companies are ceasing to trade [with the UK] because of these hurdles,” said Michael Schmidt, president of the British Chamber of Commerce in Germany… “For many small British firms, Brexit meant losing access to their most important export market… It’s like shooting yourself in the foot. And this explains why German imports from Britain are in free-fall now.””
Schmidt’s concerns seem valid, as the data shows that the UK was the only major trading partner where bilateral goods trade with Germany in May and June was still below end-2019 levels.
And as the head of Germany’s Institute for the World Economy has warned, the problems will likely get worse:
“The UK’s loss of importance in foreign trade is the logical consequence of Brexit. These are probably lasting effects. A data breakdown showed German imports of British agricultural products tumbled by more than 80% in the first six months while imports of pharmaceutical products nearly halved.”
There is also a clear risk that the problems could intensify next month, as the UK is due to implement new Border Controls from 1 October on incoming goods.
Food supplies are one key area of concern, with supermarket shelves already emptier due to the absence of EU HGV drivers, as industry magazine The Grocer highlights:
- EU vets. Nobody really understands the new rules. It reports that “official veterinarians in North Wales have been completing paperwork differently to those in Somerset“. And now vets in each EU member state will have to grapple with the same issues.
- Border control posts at ports. These have to be in place by 1 January. But, for example, Portsmouth city council says it has only received £500k to fund the new staff required – when £2.5m is needed. So delays may well be inevitable.
- Inland border control posts. The Food & Drink Federation worries about potential chaos, saying “we do not yet have clarity regarding how movements from the points of entry to the various inland sites will operate”.
- Pre-notification for imports. British exporters now have to give 24 hours’ notice before sending certain goods to the EU. The UK has not yet confirmed its new rules for imports – but it seems likely supply chain efficiency will suffer.
- Approved establishments. Brexit already means that foods of animal origin have to cross from Great Britain to the EU via a government-approved establishment. But the UK has still to reveal whether it will require the same process for imports. So buyers cannot yet review arrangements to check they comply.
The last thing that any business needs right now is further uncertainty over trading arrangements, and more paperwork.
But that seems the likely outcome next month, unless the UK government has a last-minute change of mind on the introduction of its new Border Controls