IT was good to hear Monetary Policy Committee member Catherine L Mann remind us plainly of the dismal effects of Brexit in an economic context last week.
Ms Mann, a former chief economist of the Organisation for Economic Cooperation and Development who joined the Bank of England’s MPC as an external member in September, highlighted the loss of business for firms and of wages for workers arising from Brexit, month after month.
It seems essential that some people are reminded that the damage is a continuing, very live thing, particularly given the vacuous “Get Brexit Done” mantra from Prime Minister Boris Johnson and his former adviser, Dominic Cummings. This sloganeering has seemed to give some people the impression that Brexit is indeed done and we should move on, and there appears to have been a bizarre lack of proper appreciation, sometimes perhaps motivated by ideology and often among people who should know better, of the pernicious effects of the folly.
Ms Mann in her speech last week, as well as flagging lost trade and wages, also underlined the means by which Brexit can make inflation troubles in the UK worse than they would have been otherwise.
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It is important people realise the hard Brexit delivered by the Boris Johnson administration just keeps on delivering woe to the UK’s businesses, households and economy. However, this grim reality has seemed, in contrast to the Downing Street lockdown party issue, to be something that the Brexiters who swept Mr Johnson to power do not care about. And have not cared about for months and years. We live in a strange world.
Ms Mann told the Official Monetary and Financial Institutions Forum last Friday: “The UK’s evolving trading situation post-Brexit may exacerbate any inflationary impulse from global goods and commodity markets by adding another wedge of administrative costs as well as changing the competitive landscape and perhaps altering the variety of products available. Bank research estimates a widening Brexit wedge on the supply side of the economy of some 2% by the end of 2024 from the pre-Covid trend.”
She added: “Already, the UK export volumes have been tracking well below their G7 peers. And do note that these are flows not stocks – every month below potential reflects lost business for firms and lost wages for workers.”
These effects highlighted by Ms Mann are highly significant, and very real.
Ms Mann also told her audience: “Global prices could decelerate more than expected, especially if US demand for goods slows as the waves of US fiscal stimulus cease; but also if the global consumer holds on to their accumulated savings, if supply responds robustly and if the geography of shipping normalises those costs and delays. However, whereas UK goods prices tend to evolve with global goods prices, a Brexit wedge could temper how much of this possible global downward momentum translates into domestic prices.”
It goes without saying that UK consumers are in urgent need of relief from the surge in inflation, and that anything that gets in the way of this is not a good thing.
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Annual UK consumer prices index inflation, which was only 0.4% in February last year, had by December surged to 5.4%, which is 2.7 times the Bank of England’s 2% target. And it is forecast to go higher, with economists seeing the possibility of a rise to 7% this spring.
Against a very difficult UK economic backdrop, it is crucial for people to realise the permanent and ongoing effects of Brexit, as highlighted by Ms Mann’s “flows not stocks” observation.
Ian Davies, head of UK port authorities at Fishguard and Holyhead operator Stena Line, highlighted at the weekend a 30% fall in freight traffic at the Welsh ports compared with pre-pandemic levels. He declared this was “really the effect post-Brexit”.
Speaking to the BBC’s Politics Wales programme on Sunday, Mr Davies said the start of the new UK-European Union trading relationship had hit the Welsh ports “quite hard”.
He added: “In January , we saw a big drop off ranging from 50 [to] 60% of our freight volumes.
“As people really kind of got used to the new regimes and the new documentation that was required – I would say it caught quite a few, not so much in the haulage industry but their customers, unaware, but then things gradually improved. But we seem to have plateaued; currently, we’re probably in the region of 30% down on our [pre-pandemic] 2019 volume.”
Asked how much of this fall he put down to the new trading relationship and how much to the pandemic, Mr Davies said: “I think now we’re probably in a position to say ‘yes’, this is really the effect post-Brexit of where we are and slight changes in the way that people are moving freight.”
It should go without saying that 30% is a steep drop.
While not currently centre stage in terms of the media spotlight, the Johnson Brexit circus continues at full tilt.
Negotiations have resumed this week on the Northern Ireland Protocol with talks between Secretary of State for Foreign, Commonwealth and Development Affairs Liz Truss and EU chief negotiator Maros Sefcovic.
These protracted and so far fairly fruitless negotiations, pursued previously by erstwhile Brexit minister Lord David Frost in pugnacious style, have arisen basically because the ruling Conservatives agreed something with the EU so they could get their hard Brexit and now do not like the realities of the situation of their own making.
The Northern Ireland Protocol in the UK-EU Withdrawal Agreement was formulated painstakingly to avoid the re-emergence of a hard border on the island of Ireland. It creates a customs and regulatory border in the Irish Sea. Northern Ireland, to avoid checks and controls on the island, is required to apply EU customs rules and align with a list of single-market regulations.
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The protocol has, as should have been plain from the outset, caused major disruption. This whole problem, of course, would never have arisen without the dismal determination of the Johnson administration and predecessor Conservative government to leave the European single market and customs union at any cost.
There has from the start of the EU exit odyssey been a refusal by the Brexiters to listen to good sense. If those in power had listened, we might not be in the mess we are in.
Michael Gove, now Secretary of State for Levelling Up, Housing and Communities, said in 2016 that “people in this country have had enough of experts”.
Ms Mann and Mr Davies are telling things as they are.
However, the UK Government does not appear interested in how things are on these fronts. Rather it has focused on peddling its Brexit ideology, centre stage of which is its clampdown on immigration. This clampdown, of course, has brought dire labour and skills shortages already and will be a huge drag on the UK economy over years and decades.
Sadly, the damage we have seen thus far is only the start.
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