Latest news with #AntonSpisak
New European
27-05-2025
- Business
- New European
Is the UK doomed?
That ice-filled bucket comes in the form of a report by Anton Spisak for the Centre for European Reform (CER) called rather chillingly 'A perfect storm' . Frankly the 'reset' was nice but as Spisak explains in gory, relentless, detail, without much, much more of the same the UK is fucked. Last week I wrote about the joy of the Brexit reset with the EU – that it was good for the soul to know that adults are in charge, bringing with them sensible policies will result in better trade, slightly more growth and a smidgen of hope that we are heading in the right direction. Now, like some economic ice bucket challenge, a deluge of reality has brought me back to reality and reminded me what a complete mess Brexit has made of our lives. I am sure the CER wouldn't quite put it that way, but the facts are obvious for anyone with the ability to read. This report confirms the analysis produced by the Office for Budget Responsibility after the referendum – lower trade equals lower productivity equals lower wealth. As expected, the UK's trade performance post-Brexit has been a disaster, a catastrophe that is hitting growth, productivity and the nation's wealth. Without a radical and rapid improvement, we will continue on a long, drawn-out period of relative economic decline, as our neighbours and rivals eat our lunch. Suggested Reading The UK-EU reset deal is not a Brexit surrender Jonty Bloom As this report makes clear, 'the UK is currently experiencing the most severe trade stagnation in a generation – and one that has undermined post-pandemic recovery and continues to weigh heavily on the country's growth prospects.' To see why that is the case you need to look at the UK's trade performance over the last 50 years. Between 1980 and the financial crisis of 2008 the UK's trade volume increased at 5% a year; after the credit crunch we managed over 2% a year. To be fair, this was the same disappointing performance suffered by many other countries. But if the UK's trade performance was mirroring global trends, that ended in 2020 and with Brexit. Since then, UK trade volumes have 'suffered a particularly severe setback and, in contrast to many other countries, have not yet fully recovered.' What could possibly have happened in 2020 to shatter the UK's trade performance? Covid hid the truth for a while but now the trend is obvious for all to see. 'At the end of 2024, trade intensity remained 3.5 per cent below pre-pandemic levels, even as it rose by 1 per cent across the G7 and 3 per cent across the EU-27'. What little growth there has been has been driven by inflation, not increased volume of trade: 'In real terms, UK trade volumes have grown just 1 per cent on their 2019 levels, compared to an 8 per cent growth in both the G7 and EU-27'. Brexit has destroyed the UK's trade performance, not just with the EU but with the rest of the world too. By the beginning of this year, UK goods exports were 20 per cent below their 2019 levels. If they had kept pace with other countries' trend rate, they would be 30% higher than they are now. It is a puzzle why trade to countries outside the EU have also fallen, but the answer may well be that 'significant new frictions in trade with the EU are affecting supply chains across the board. As intermediate inputs sourced from European markets became costlier, the relative price of UK exports rose, and competitiveness declined across the board.' It was, it seems, that being part of the EU kept us productive and competitive. Who knew? Brexit has made all our exports less attractive and our industry less competitive. The UK is losing its share of global exports at a faster rate than Germany, which has been blighted by numerous serious structural problems. Uit seems Brexit was an even bigger blow than we thought. The report says: 'Compared to the G7 average, UK real GDP is nearly 5 percentage points lower than pre-pandemic, with exports lagging 11 percentage points behind. Against the EU-27 average, the overall GDP gap was narrower – around 2 percentage points………The UK stands out as a real outlier when it comes to post-pandemic trade.' Remember, Brexit was supposed to make us richer not poorer, but it has cost us a fortune and it is costing us more every year. Because worse trade hits both the productivity of the UK and its economic growth rate. Improvements in productivity are often driven by more intense, international competition, which forces companies to invest and innovate. Less trade means less competition and therefore less reason to innovate, invest and improve productivity. The great leap forward in British productivity over the last 50 years followed on from membership of the EU and its Single Market, but we left both and with them went the productivity improvements. As for growth, the report says: 'Exports have historically contributed positively to UK real GDP growth. Since 2020, however, exports have become a drag on UK GDP growth, on average subtracting nearly 0.5% per annum'. Not all of this down to Brexit, but as Spisak writes: 'This challenge… has been uniquely exacerbated by Brexit, which has increased the relative costs of exporting overseas for British manufacturers. The result is a subdued export performance on a scale that is unprecedented in recent history.' That 'unprecedented' hit to our export performance comes at the worst possible time, with rising protectionism, and instability. Trump has just put 10% tariffs on our exports to the USA, and that is considered a victory for the UK. What would defeat have looked like? So, what can we do? First off, the Labour government has to have a laser-like concentration on trade if it really wants to get growth going. This is not a statistical blip, this is a structural failure. We have therefore to end our long-running decline in competitiveness and realise that without improved trade, growth will not improve. And we must concede that the UK-EU 'reset' was nowhere near enough to kick-start growth. According to Spisak, it is 'unlikely to make a noticeable difference to the current growth trajectory.' I am sorry the 'reset' was nice, comforting and a step in the right direction but it was also nothing like enough. We have entered a sustained period of economic decline without the competition and openness necessary to force British industry to become efficient. Brexit has made us all poorer, we have lost touch with our competitors, they are racing ahead of us, and we are falling further and further behind. Why do you think the government is borrowing so much, why wage growth is so weak, why tax revenues are not enough to maintain the state? Sorry to rain on the parade, but these are the facts, and unless we face them, we are doomed to live through decades of further relative economic decline. Yet there are no signs we are ready to face one particular fact: that the obvious answer is to rejoin the Single Market ASAP.
Irish Times
26-05-2025
- Business
- Irish Times
The UK's trade performance remains dire
This month the UK has signed trade deals with India, the US and the European Union. At a time of worry about the prospects for world trade, this should be a reason for feeling less depressed about the outlook for Britain. But the deals, while better than none, might not merit even one cheer. The deal with the US will merely limit the damage done by Donald Trump's trade war , one that is particularly unjustified in the case of a loyal ally that does not even have a bilateral trade surplus in goods with his country. The other two are marginal liberalisations. In all, the UK's trade opportunities have been unambiguously worsened since Brexit and now Trump's trade war, relative to what they were before 2016. Any improvement in market access might seem a good thing. But it can easily not be good enough, because the deals themselves are too small or because the performance is too feeble. READ MORE In 'A perfect storm: Britain's trade malaise, weak growth and a new geopolitical moment', published by the Centre for European Reform last week, Anton Spisak lays out the latter story. Between 2019 and 2024, the volume of UK trade grew at a compound annual rate of only 0.3 per cent. This compares terribly with the 4.9 per cent achieved between 1980 and 2008 and the 2.6 per cent achieved between 2008-19. [ Explainer: what is Keir Starmer's Brexit reset deal? Opens in new window ] Declines in growth rates also occurred in France, Germany, the EU, Japan and the US since the financial crisis and even more so since the pandemic. But the UK's growth between 2019 and 2024 was well below that of those other economies – 0.7 per cent for France, 0.8 per cent for Germany, 1.9 per cent for the EU, 1.4 per cent for Japan and 2.4 per cent for the US. For an open economy such as the UK's, a trade performance this poor is truly worrying. 'We're at a critically low level of housing stock' for buyers and renters Listen | 33:06 Not surprisingly, exports have, for the first time in decades, become a net drag on the UK's economic growth, rather than a contributor to it. Thus between 2020 and 2024, the average contribution of exports to real economic growth was minus 0.4 percentage points. This dire performance was driven by what was happening to exports of goods: in real terms, they were 20 per cent lower in the fourth quarter of 2024 than five years before, while exports of services rose by 22 per cent over the same period. Yet, surprisingly, the performance of UK exports of goods to the EU, which were down 19 per cent over this period, was much the same as that of exports of goods to the rest of the world, which were down by 20 per cent. [ UK needs new EU trade deal, not scraps from the White House Opens in new window ] It is indeed puzzling that exports have fallen to a very similar extent to the EU and the rest of the world. One fairly plausible explanation is that supply chains from the EU have been disrupted and that has undermined the competitiveness of UK goods in third markets. Whatever the causes, a trade performance this poor will, if continued, inevitably undermine economic growth, not least via its impact on productivity growth. Unfortunately, there is only one element in the three deals in question that could possibly bring about any noticeable improvement in trade performance. That is the decision of the US to keep in place the 10 per cent tariffs on most British exports. Last Friday, Trump even proposed a 50 per cent general tariff on EU exports to the US. Earlier this month, he also agreed a 30 per cent tariff on China. Such blatant discrimination violates the most fundamental principle of the World Trade Organisation. Yet, on the face of it, this situation might be beneficial to the UK. Two rather large caveats to such optimism can be identified, however. One is that this relatively favourable relationship might shift many times. The other is that even a 10 per cent tariff is about four times higher than average US tariffs used to be before this presidential term. So UK exporters of goods to the US, while perhaps in a favourable position relative to those from China and the EU (and maybe many others), will be at a big disadvantage vis-a-vis domestic US producers. Moreover, the deal with the EU, welcome though it is, will not change the situation on trade to any significant extent. The main exception is the agreement to work towards an agreement to ensure that the 'vast majority' of agri-food exports to the EU will happen without checks or certificates. Yet, in the end the UK is never going to get rich by expanding exports of farm products. What we are seeing then is an economy whose trade performance is dire, above all in goods. This reflects an underlying loss of competitiveness and dynamism. A possible response would be deeper integration with the EU. More important still would be to focus all attention on strengthening the underlying fundamentals of economic performance for an unfriendly world. – Copyright The Financial Times Limited 2025
