This is Frost's complacent tweet last week, playing down the awful figures:
1. I have been looking at today's trade numbers. This month's unique combination of factors made it inevitable that we would see some unusual figures this January. As @ONS has pointed out, caution should be applied when interpreting these statistics.Why?— David Frost (@DavidGHFrost) March 12, 2021
To eliminate the covid factor, UKTPO compare EU trade with the rest of the world and find while EU exports plummeted by 46% exports to non EU countries fell by only 9.5%:
"Our calculations show that total exports to the EU fell by 46.5% in Jan 2021 compared to average exports of Jan 2018-20, while exports to non-EU countries fell by 9.5% over the same period. These are dramatic changes. On the other hand, UK imports from the EU were down by 29.3% with imports from non-EU countries down by 17.7%, month-on-month. Comparing the impact on UK trade with the EU and non-EU countries goes some way to accounting for the differences in the impact on trade arising from the UK’s exit from the EU, and the impact of COVID-19."
Exports to France, Italy and Germany fell by 56%, 56% and 49% respectively, while UK exports to Japan (+7.5%), Canada (+1.6%) and Australia (+0.8%) actually increased. Covid didn't stop them.
The UKTPO said the ONS compared January 2021 with the same month in 2020 but argued this was not a ‘normal’ month or year given the state of play of Brexit negotiations at the time. In order to try and account for such volatility together with the effect of the Coronavirus pandemic, they compare the value of trade for January 2021 with the average value of trade in the preceding three years (ie. January 2018, 2019 and 2020).
When looked at that way, total exports to the EU fell by 46.5% in Jan 2021- even more than the ONS's figure of just over 40%.
Next, UKTPO looked at the range of different industries affected using something called the Harmonised System (HS) at the HS 2- and 4-digit levels. At the HS 2-digit level there are 97 industries in total apparently, and at the HS 4-digit level there are 1221 industries.
About 85% of industries at the HS-4 level (1041) and 99% at the HS-2 level saw exports to the EU decline, while to the rest of the world only 63% and 67% respectively saw a drop.
Some might say the impacts depend on the type of industries, that some are more sensitive to EU trade than rest-of-the-world trade. Well, UKTOP looked at this too and found the impact of Brexit was even more pronounced.
Figure 2 below shows the difference in the percentage changes in exports (in blue) and imports (in red) between the UK and the EU, and the percentage change in export (and imports) between the UK and the rest of the World. Take the first entry in the figure which is for Animal & vegetable oils and fats. In this sector, UK exports to the EU declined by 60%, while UK exports to ROW increased by 26%.
This is in the same industry remember. The difference between these two changes is therefore 86% (60+26).
Worst affected were animal and vegetable oils and fats and materials manufacturing but others were seriously impacted and more importantly the figures show a marked difference in the same industry sector between EU and non EU exports.
It is hard to deny that Brexit has not had a huge material impact.
What does it all mean? UKTPO say the changes seen are "dramatic and worth underlining":
"UK exports to the EU in January 2021 were nearly 47% lower than the average of the preceding three years, and imports were nearly 30% lower. This is unprecedented. Some of this is because of COVID – but that is probably a small part of the story because, for example, exports to the rest of the world only declined by 10%. Some of this is temporary – the initial decline is no doubt bigger because of the stockpiling in November and December and because traders are likely to adjust to the new bureaucratic regimes – so the negative impacts will lessen. However, some of this will be very long-lasting and was not an inevitable consequence of the UK leaving the EU. It is an inevitable consequence of the manner in which the UK has left the EU, and of the nature of the Trade and Cooperation Agreement signed with the EU."
I don't think any of this should come as a surprise, although it probably will in Downing Street. There will no doubt be a diversion of trade as well as a loss of EU trade. The question will be if UK producers can indeed compete in markets far way and whether trade that replaces EU business is profitable or not.
It would be surprising to me if UK manufacturers have been focusing their efforts in the EU when higher margins were available elsewhere in the world. That wouldn't make sense.
Lord Frost previously worked as CEO of the Scotch whisky association which may have given him a warped sense of what exporting is about. I assume Scotch is in demand, markets across the world are pulling it in because it's unique. He ought to have a go when there is no 'pull' and the manufacturer or supplier is 'pushing' with all their might and it still won't go in.
So, the jury has only just gone out but I expect them to return soon enough with a guilty verdict on Brexit.
