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The UK’s trade with the European Union deteriorated in the first month since the Brexit split, suggesting that trade relations between the two economies will suffer more than the British government has announced.
Exports of goods from the UK to the EU fell almost 41% in January compared to the previous month, while imports from the bloc fell 29%, according to data from the Office of National Statistics released on Friday. The most affected EU imports were machinery and transport equipment, especially automobiles, and medicinal and pharmaceutical products.
Importers on both sides of the channel built up stocks before the January 1 split, resulting in less international freight transported by air, sea and rail and largely avoiding the prolonged traffic congestion that many critics have predicted.
Prime Minister Boris Johnson insisted on any friction suggested by more high-frequency data has been mere “initial problems ”, but the evidence from the statistical agencies in Germany, France and Italy indicated that there was a significant drop in EU remittances to Britain in the first month after the end of the transition period.
‘Inventory Effects’
“What we don’t know is how much of it is permanent and how much is ‘initial problems’ and will gradually return,” said former UK trade negotiator David Henig, director of the European Center for International Political Economy. “You could assign a quarter of the changes to the storage effects.”
Exports of food and live animals to the EU – goods that are expensive and difficult to store – plunged 64% in December, potentially due to stricter checks and certifications implemented by the EU at the end of the transition period, ONS said. The Scottish Seafood Association pointed to an increase in the “bureaucracy” in goods sent from Scotland to France, with the signature of shipments taking six times as long and the previous overnight transit now lasted three days.
The government attributed the results to inventories, to the Covid-19 blockades and to the adjustment of companies to the new arrangements. David Frost, who negotiated the Brexit trade agreement with the EU and is now the minister in charge of the UK’s relations with the bloc, said it was inevitable that the numbers would be “unusual” in January and that freight volumes have since returned to normal.
“Many companies have made the necessary changes to negotiate effectively with the EU, but we are focused on providing active and broad support to others who need to adapt,” he said in a tweet.
The weak trade numbers contributed to the biggest drop in economic production since April. Separate figures released Friday showed the United Kingdom gross domestic product shrank 2.9% in January due to declines in the manufacturing and service industries.