Tuesday 29 June 2021

Trade woes continue to bite

A survey by the Institute of Directors and reported by the FT is starting to show the scale of the damage being done to UK-EU trade.  Almost a third of British companies that trade with the Europe have seen a decline or loss of business since 1 January.  The poll found that 17 per cent of UK companies that had previously traded with the EU have stopped — either temporarily or permanently — since the start of the year.  I'm not sure if these shocking numbers are worrying government ministers or not, but they should be.

The report is by Peter Foster who tweeted a thread which you can see below:

The surprising figure is that 6% of businesses had apparently seen an increase,  How they did this is not explained but the survey was about 'trade' which I assume includes imports and these are not really affected at the moment until the UK government implements all the checks and paperwork in October. I assume this is why some firms are either not affected or have seen an increase.

Over 40% think the new rules will have a moderate or significant impact on imports after October so things are probably going to get worse.

Something else that emerges is that most of businesses that were hit at the start of the year, haven't seen that much improvement over six months, with the survey finding those negatively impacted is roughly same in June as it was in January. They are not teething problems.

Foster says when he talks to people in Europe they find it "head-scratching that the UK should have done such a low-ambition, high-friction deal with the massive market on its doorstep...to give themselves freedom to do Rest of World deal with 0.2% GDP upside at best."

This is well illustrated by the experience of The Cheshire Cheese Company (CCC). They decided to stop selling to the EU on a bulk wholesale basis because the cost to ship a consignment to the EU has risen from about £300 to more than £1300, so it's just not viable.

Simon Spurrell, who runs the Macclesfield-based specialist cheesemaker, said that not only was shipping directly to 446m EU consumers not viable “neither can we now ship to Northern Ireland any more.”

But if the government thinks trading globally is the answer, listen to this. CCC were told by ministers to export to Canada instead of the EU but when they tried a first shipment they got hit by 245% tariffs!!  So, they had to stop that as well.  And we have a FTA with Canada!!!

Meanwhile, big companies like JD Sports (which Foster says imports trainers from the Far East) have moved distribution into the EU and although their business will continue there will be less tax take for UK Exchequer and fewer jobs for UK workers.  As Foster says, while it's obviously worth it for companies to move entire operations to serve an EU market of 465m consumers, it is less obvious the other way round. 

Of course there will continue to be inward investment in the UK but as I have pointed out on many occasions, not as a base for exporting to the EU. That no longer makes sense any more for most businesses.

Elsewhere, Shanker Singham and his followers are still pushing "equivalence" as the basis for some new arrangement with the EU. This tweet from David Henig was kicked off by a claim from Singham that Henig was wrong to point out that the UK Government approach of mutual "recognition and equivalence is somehow out of step with the trade orthodoxy." 

Henig had earlier summarised Lord Frost's basic philosophy by saying that he rejected that the idea that  (a) global trade norms were in terms of regulations and borders; and (b) that any short term price for this is worth paying.

This resulted in one of Singham's adherents making this extraordinary claim:

As far as I know the only 'equivalence' in an FTA is in the mutual recognition of conformity assessments - that is each side can recognise bodies in each other's territories which can certify that goods being exported meet the harmonised (EU) or national standard (non-EU) of the importing country. This is surely explicit confirmation that neither side sees the others regulations as 'equivalent.'

Don't forget this is after five years of non stop discussion. Amazing isn't it?


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