Richard Partington Economics correspondent 

Exports to EU plunge by 40% in first month since Brexit

Fall in exports worth £5.6bn comes as UK economy in January suffers deepest drop since first wave of Covid pandemic
  
  

Containers at the port of Felixstowe
The ONS said the global decline in imports and exports of about a fifth, driven by falling trade with the EU, contributed to the worst monthly performance since records began in 1997. Photograph: Peter Cziborra/Reuters

UK exports of goods to the EU plunged by 40.7% in January as the first month since Brexit and the imposition of a new Covid lockdown resulted in the biggest monthly decline in British trade for more than 20 years.

In the first month since leaving the EU on terms agreed by Boris Johnson’s government, the Office for National Statistics said goods exports to the bloc fell by £5.6bn, while imports fell by 28.8%, or £6.6bn.

Exports of food and live animals to the EU were the hardest hit by Brexit, collapsing by 63.6% in January. Consignments of fish and shellfish collapsed by 83% from the level a year ago to only £16m.

This reflected heavier disruption and additional checks for consignments from this sector that prompted furious protests from the fishing industry. However, food and live animals account for only 7% of total UK exports.

UK exports

After stockpiling and disruption at UK borders in the run-up to the Brexit transition, the decline also came as the economy in January shrank by the largest amount since the first wave of the pandemic, with gross domestic product (GDP) falling 2.9% from December, according to the ONS.

The ONS said the January performance was the worst since monthly records began in 1997, as a 1.7% rise in non-EU trade, worth £200m, failed to make up for the plunge in cross-border activity with the UK’s biggest trading partner. Overall, global UK exports and imports fell by about a fifth.

Although January’s GDP figure represents the biggest contraction since the first lockdown almost a year ago, analysts had forecast a bigger decline of 4.9%, suggesting that businesses and households adapted better to harsh restrictions than during the first wave of the pandemic, when GDP fell by more than 20% in April 2020.

Experts said the scale of the decline in January trade was unlikely to be permanent because there was evidence companies stockpiled goods before the Brexit deadline, meaning they would not need to send as many shipments as usual in January. The decline was lower than a 68% plunge reported by road hauliers, while the ONS said there were signs trade had started to pick up at the end of the month.

UK GDP

The closure of shops during the Covid-19 lockdown reduced demand for clothing shipments, car production fell and exports were weak to EU countries as tougher coronavirus restrictions were imposed across the continent.

Alongside stockpiling, Covid disruption and lockdown, the ONS also changed the way it collects export data after Brexit, which could mean it takes longer to record some UK goods shipped to the EU.

The prime minister’s former chief Brexit negotiator Lord Frost said there was a “unique combination of factors” that meant it was “inevitable that we would see some unusual figures this January”.

Frost, who was elevated last month to become the cabinet minister responsible for Britain’s relationship with the EU, said these effects were now “starting to unwind” and that overall freight volumes had been “back to their normal levels for over a month now”.

However, one economist said Brexit played a decisive role in January and would continue to weigh on growth. “Brexit made a bad situation worse,” said Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics. “Brexit is best seen as a slow puncture, rather than a sudden blowout, with the costs gradually accumulating in the form of lower investment and immigration than otherwise would have been the case.”

UK exports

In a reflection of the Brexit impact, UK goods exports to Ireland fell 47% in January, the sharpest fall among main trading partners.

While the government has admitted to “teething problems” at the start of the new relationship, business leaders have warned that lengthier delivery times and higher costs are likely to remain as an endemic feature of Brexit.

Suren Thiru, the head of economics at the British Chambers of Commerce, said: “The practical difficulties faced by businesses on the ground go well beyond just teething problems and with disruption to UK-EU trade flows persisting, trade is likely to be a drag on UK economic growth in the first quarter of 2021.”

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It comes as the government was forced this week to delay the introduction of further post-Brexit import checks by six months – a U-turn because a network of 30 border posts being built to process incoming goods would not have been ready on time.

A government spokesman said the figures did not reflect the overall EU-UK trading relationship post Brexit.

“Many businesses have adapted well, and our focus now is on making sure that any business that is still facing challenges gets the support they need to trade effectively with the EU.”

 

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