UK exports to EU slumped in January as economy contracted again in lockdown

Data about the impact of the Covid pandemic on public health is abundant. Thanks to an impressive array of statistics, we are able to measure and monitor the infection rate of the virus, the number of people who end up in hospital and those who end up dying from the disease.Data on Brexit and its impact on the economy, by contrast, has been very thin on the ground. Anecdotally, traders have reported that the UK’s departure from the EU’s customs union and its single market has caused significant damage. The government, for understandable reasons, has tended to play down the level of disruption. On Friday, the Office for National Statistics (ONS) revealed that Britain’s goods exports to the EU slumped by a rather staggering 40% in January.

In the same month, imports from the EU fell by almost 29% compared with December. In the round, the UK experienced the biggest decline in its exports and imports since comparable records began in 1997. Exports of food and live animals to the EU were down 63% in January. Exports of cars, car parts, chemicals and pharmaceuticals were also down sharply month-on-month.The ONS believes that “much of this is likely the result of temporary factors” and that other evidence suggests “trading began to recover towards the end of the month”. Fair enough, but the numbers are shocking and not easily dismissed.It’s striking that the UK’s trade with non-EU countries did not experience the same level of upheaval. 

The end of transition, the burden of the new trade rules with the EU, the cost and hassle of the extra paperwork clearly hurt imports and exports, but the extent to which that was true and how lasting the impact will be is hard to judge with any confidence at the moment.   That’s because there were other factors in play: we are still in the middle of the worst downturn in 300 years, lockdown in January affected demand in the economy and therefore trade flows; companies were running down stockpiles which had been assembled before Brexit; the French introduced a requirement for lorry drivers to produce Covid test certificates at the border in December.The ONS says it will take “months and perhaps years” to confidently isolate a Brexit effect. In the meantime, the government continues to speak of “teething problems”. It’s possible, however, that Brexit will end up costing us some teeth. With wonderful timing, the UK left the EU in January and simultaneously went back into lockdown. GDP fell by 2.9% month-to-month - that’s a bigger drop than in November's (2.3%) fall in output but far less painful than the collapse in output last April (18.3%).

School closures dragged down output in education and restricted what parents could do elsewhere. Hotels, pubs, gyms, hairdressers and others consumer-facing businesses struggled to offer their services online. Consumer spending slowed.But the decline in activity in many other sectors was modest, and output in healthcare accelerated away on the back of the rollout of the vaccine programme and increased testing. Businesses and households have learned new tricks and are better adapted to cope with restrictions than they were a year ago. But lockdown has still caused very dramatic falls in output. The economy in January was 9% smaller than it was in February last year, before the crisis began. That’s a lot of lost ground that needs to be made up.