BREXIT 100 DAYS
Above: Taking a global view of the party market.
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THREE MONTHS OF BREXIT - NO REASON TO PARTY?
he warnings were made - a vote to leave the European Union would kick off an unholy recession, cause ripples in the housing market and, above all, create a huge downward curve in imports and exports. This was all according to our own UK government over a five-year period since the referendum vote which didn’t go the way that most people expected or wanted. Now passing some three months of trading pattern, with a global curveball thrown in for good measure, we have a more evidential view of the ramifications of that decision to leave. The split has already seen a negative impact on the UK economy, the data shows quite clearly, even if it has been largely overshadowed by the coronavirus pandemic. Many of the consequences of Brexit will need time and motion to be understood. With Britain outside the EU’s single market and customs union, trade with the bloc has been damaged, for sure, though the full extent of the damage won’t be clear until businesses fully re-open after lockdown and time passes into the new normal. Some of the claims made by the remain camp, ‘Project Fear’ as not so affectionally named by the press, have proven to be overstated. In a report published before the 2016 referendum, the Treasury predicted that a vote to leave, followed by the immediate triggering of the Article 50 withdrawal process, would see national income decline by as much as 3.6% within two years, 520,000 more people unemployed and house prices fall by 10%. It didn’t turn out that way. Not least because the government didn’t invoke Article 50 until March 2017. By June 2018, gross domestic product had risen by more than 3%, unemployment had fallen by 280,000 and the average house price had gained more than 7%.
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Following PPE’s ‘The Brexit Effect’ article in the January/February edition, we catch up with suppliers to understand how the ship is sailing – or not – as we cross the first hundred days of Brexit. Then came COVID-19. GDP shrank almost 10% in 2020, the worst slump since the Great Frost of 1709. The economy has only partially recovered from the huge losses incurred during the first lockdown of spring 2020, leaving us further below pre-pandemic levels of output than any other Group of Seven nation. INCREASED COST OF LIVING? In April 2016, the government sent a leaflet to all UK households, urging them to vote in favour of staying in the EU. It warned that leaving would increase the cost of living, because a falling pound would make imports more expensive – with around half of all UK imports coming from the European Union. That such leaflet would turn out to be mostly correct; the pound fell by as much as 18% against the Euro within two years of the referendum and remains 12% below its level on the day of the Brexit vote. Consumer-price inflation reached a near six-year high of 3.1%
in November 2017, squeezing living standards. It remained above the Bank of England’s 2% target for almost all of the following two years. But inflation has since slumped because of the coronavirus pandemic. ABOUT TRADE AND PRODUCT… The Treasury predicted that if the UK left the EU and managed to reach a trade deal with the bloc, the country’s economy would be between 4.6% and 7.8% smaller in 15 years’ time than it would have been had it stayed in the EU. Though Britain has only been formally out of the EU’s single market for around three months, the Office for Budget Responsibility estimates that Brexit has already lowered GDP by 1.4% since the referendum. It now expects GDP will be 4% lower in the long run than had Britain remained in the EU. The government also said that leaving the EU would make it more difficult for companies to export goods to the bloc, and that businesses would face higher costs. This warning turned out to be correct with party product suppliers having to traverse extra paperwork, jurisdiction and more to be able to ship into Europe. In January alone, exports to the continent shrank by 41% from the previous month. David Frost, who negotiated the post-Brexit trade deal with the EU and is now minister responsible for Britain’s relations with trading Europe has blamed stockpiling in December and the coronavirus lockdown for the reduction in trade. He says trade recovered to its normal level at the start of February 2021. The full cost of Britain’s decision to cut ties with its biggest and closest commercial partner is likely to only become clear once the coronavirus restrictions ease and businesses return to normal.
Inset: COVID-19 lockdown creates an unprecedented downturn in GDP.
APRIL 2021 PROGRESSIVE PARTY EUROPE
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