Britain’s economy shrank less than expected in January, but trade with the European Union fell sharply after the end of the Brexit transition period earlier this year, Office for Economic Affairs figures showed on Friday. National Statistics.
Exports of goods to the EU fell 40.7% from December, and imports 28.8%, by far the biggest falls since comparable figures began to be collected in 1997.
In comparison, exports to non-EU countries increased by 1.7% and imports of the same group fell by only 17.6%.
The UK left the EU’s single market and customs union on January 1.
The ONS also said gross domestic product in January fell 2.9%, well below analysts’ consensus forecast of a 4.9% decline.
Apart from the contraction in trade, the fall in GDP is mainly due to restrictions on economic activity related to the COVID-19 pandemic that were imposed soon after the new year, including the closure of schools.
The hit to services and manufacturing has been partly offset by a significant increase in healthcare spending, due to the nationwide rollout of a “test and trace” system.
Perspectives : Expect a recovery in GDP from March, after the start of a successful vaccination campaign, followed by a gradual reopening of the economy. But the trade figures appear to show that border issues are more than the Brexit “starter issues” ignored by the government.
The actual slump in trade may not be as large as the January figures reflect, due to a buildup of inventories in December, when businesses were seriously preparing for Brexit. And the paperwork and compliance issues faced by businesses moving goods across the border are expected to ease in the coming months.
But a growing number of companies are also designing new supply chains to avoid Brexit-induced costs. And the scale of the drop in UK exports to the EU gives some idea of the economic price to pay for increased trade frictions with the country’s biggest market, by far.
Extract from the archives (February 2021): Amsterdam just overtook London as Europe’s newest stock exchange