Status: 01/31/2023 1:53 p.m
Great Britain had high hopes for the domestic economy after Brexit. But three years after leaving the EU, the track record is meager. The country is likely to be the only major economy to slip into recession this year.
The German Chamber of Industry and Commerce (DIHK) sums up the outcome of Brexit as an “economic disaster” for Great Britain and the EU. On the third anniversary of Brexit, DIHK President Peter Adrian has no warm words to say about the United Kingdom’s exit from the EU. For German companies there is still considerable planning and legal uncertainty. “There is a risk of trade conflicts because Great Britain is distancing itself from the EU exit agreement.”
“There’s a lot at stake”
According to the DIHK, German companies have more than 2,100 branches in Great Britain and employ more than 400,000 people. British companies, on the other hand, have 1,500 branches and almost 300,000 employees in Germany. “There is a lot at stake for the economy on both sides of the Channel,” said Adrian.
The UK’s economic record three years after Brexit is poor. This can also be seen in the trading figures. “While Great Britain was still Germany’s third most important export market in 2016, the country slipped to eighth place in 2022,” said the DIHK President. According to the state-owned company Germany Trade and Invest (GTAI), the country could drop out of the top ten German trading partners for the first time in recent history.
Performs worse than Russia
While the International Monetary Fund’s (IMF) economic forecast for 2023, which has been revised upwards and was published today, has brought relief to large parts of the world, the hangover mood continues in the United Kingdom: Britain is the only large advanced economy for which economists have a predicted recession.
According to estimates by the IMF experts, the British economy will not grow this year, but rather shrink by 0.6 percent. The country thus brings up the rear in the published IMF analysis and performs worse than Russia, which has been subject to extensive sanctions for its war of aggression against Ukraine. The background to the gloomy prospects is the economical tax and monetary policy and the still high energy prices, which are a burden on household wallets.
labor shortage
For the conservative British government, the forecast on the third anniversary of the exit from the EU is not very flattering. The weak growth is mainly due to the shortage of workers, said the director of the Institute for Fiscal Studies, Paul Johnson, of the BBC on Tuesday. The trigger for this was, among other things, Brexit, which made immigration from the EU considerably more difficult. In many areas – such as gastronomy or logistics – there is a shortage of workers.
Previously, these professions were exercised by EU citizens. However, many of them turned around in the pandemic and around Brexit. Now it is no longer easy to come to the UK to work because of expensive visas.
Political instability worsens the situation
According to Paul Johnson, leaving the EU has also brought other challenges that are hampering British economic growth. Among other things, the British economy is suffering from the country’s political instability in recent years.
The IMF figures showed Britain is not immune to the pressures almost all developed economies are facing, UK Finance Minister Jeremy Hunt told Sky News. He referred to long-term forecasts, according to which Great Britain should grow faster than Germany and Japan.
Fewer trade contracts than hoped
But other key figures are also causing disillusionment in the British economy. One of the central promises of Brexit was the possibility, as a sovereign state, to conclude its own trade agreements free of EU regulations. However, the UK has clearly missed the target it set itself for the turn of the year: Less than two-thirds of foreign trade volume has so far been covered by post-Brexit trade agreements.
Originally, the government in London had set a target for new trade contracts to account for 80 percent by the end of 2022. According to the latest available official figures, only 63 percent of foreign trade is covered by such contracts. The contracts that have been renegotiated to date, for example with Australia or New Zealand, do not come close to offsetting the serious losses in foreign trade with the EU. And the hoped-for free trade agreement with the USA is a long way off.
Export targets will probably be missed
The “Guardian” also reported last week that the UK is also likely to miss its export targets by a wide margin. UK exports will not be worth £1 trillion until 2035 at the earliest, the newspaper said, citing statements by Secretary of State Andrew Bowie.
Former Prime Minister Boris Johnson announced in 2021 that this goal would be achieved by 2030. Secretary of State Bowie blamed “external shocks” such as falling global demand, fluctuating exchange rates and high inflation for the weak numbers. He did not mention Brexit – in contrast to business representatives.
Exporters stop selling in EU
The proportion of smaller companies in the UK exporting abroad has also fallen after Brexit. “One exporter in eight has stopped selling to the EU temporarily or permanently – and another tenth are considering doing so,” said Lucy Monks of the Federation of Small Businesses, which represents small firms and the self-employed. Around a fifth of these companies are currently still exporting their goods or services abroad – according to the association, this is the lowest level since the beginning of the pandemic, when restrictions caused trade to collapse overall.
Boris Glass, senior economist at ratings agency S&P Global, said increasing bureaucracy in UK-EU trade has hampered the competitiveness of smaller UK manufacturers in particular, as they have fewer resources to deal with it.