Brexit: Ian McConnell — Exporters must battle populist tide as damage racks up

Of course, a raft of macroeconomic forecasts, including those drawn up by the Theresa May administration, had made plain the major damage to UK gross domestic product that would be triggered by a Brexit featuring an average free trade deal, relative to continuing EU or even just single market membership.

So it should be no surprise to anyone that the Boris Johnson Government’s decision to throw away frictionless trade, with its hard Brexit and narrow free trade deal, is resulting not only in short-term chaos but far more permanent damage. And that is before we even get to the corrosive long-term consequences for the economic prosperity of the UK, with its ageing population, of clamping down on immigration from EU countries.

Even though what has transpired was a racing certainty, surveys revealing the huge proportions of businesses being affected, and the significant numbers that have already thrown in the towel on EU exports or are considering doing so, still make for worrying reading.

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On this front, a survey this week from the Federation of Small Businesses provides further undeniable evidence of the widespread and very damaging impact of Brexit.

We also continue to see the sad realities of Brexit for individual companies.

The impact of the UK’s hard Brexit was highlighted when it was announced last Friday that fast-growing Morayshire artisan craft beer firm WooHa Brewing had fallen into administration.

Joint administrator Iain Fraser, partner with FRP, said: “WooHa Brewing Company is a high-profile craft brewing business with a substantial and growing trade and consumer client base. The business had grown rapidly in recent years, was well financed, and had a clear strategy and positioning in a crowded market. The business has unfortunately been severely affected by a combination of Covid, the contraction of its main markets and the bureaucracy of Brexit.”

Of course, the last thing so, so many businesses and households need right now as they deal with the immense economic fallout from the coronavirus pandemic is the colossal Brexit woe.

This obvious reality should have been plain for all by last summer when the Johnson Government refused to extend beyond the end of 2020 the transition period which had kept the UK in the European single market following its technical Brexit on January 31 last year. The EU offered such an extension. But the UK Government, and its Cabinet packed with Brexiters, refused this offer, in spite of the impact on millions of people and many, many thousands of businesses in the UK.

Things are tough enough, without the Tories’ Brexit chaos.

The huge challenges presented by higher youth unemployment arising from the coronavirus pandemic were underlined this week in a study published by the Learning and Work Institute and The Prince’s Trust, and supported by banking group HSBC.

Mitigating youth unemployment must be a key priority for the UK and Scottish governments. This will require much focus and effort, and money. And it beggars belief that the Conservative Government chose to bring on its enormous Brexit shambles at a time when such other major challenges have to be tackled.

There has been way too much focus from this Johnson Government on parading Union Flags, and far too little attention paid to substance and realities, even if the British nationalism is going down a treat with a very sizeable part of the electorate south of the Border.

This week’s study on UK youth unemployment projected the long-running “scarring” cost for young people entering the labour market in 2021, as a result of higher unemployment arising from the pandemic, would be £14.4 billion over the next seven years.

This forecast cost relates to “lost earnings and damage to employment prospects”.

The report warns young people will “increasingly bear the brunt of the unemployment crisis, at a growing cost to the UK economy”, highlighting a trend which has looked lamentably inevitable since the onset of the pandemic.

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Analysing the likely effect of the Covid-19 pandemic on the UK labour market, the report concludes the economic cost of higher youth unemployment in terms of lost national output will be £5.9bn in 2021, rising to £6.9bn next year.

The fiscal cost of higher youth unemployment, in the form of lower tax revenue and higher benefit spending, is forecast to be £2.5bn in 2021, increasing to £2.9bn in 2022.

The study found young people in Scotland had seen a 14 per cent drop in hours worked, compared with before the pandemic.

And around 55% of employers surveyed in Scotland expect the pandemic to continue to have a negative impact on young people’s employment prospects over the next three to five years.

The Prince’s Trust, while flagging these alarmingly large overall numbers on the financial cost of youth unemployment and underlining the disproportionate impact of the coronavirus pandemic on this segment of the labour market, also rightly underlined what joblessness can mean personally for young people.

Kate Still, director of The Prince’s Trust in Scotland, said: “We … know from 45 years’ experience of working with young people that youth joblessness can impact self-esteem and mental health for years to come, if we fail to act.”

Action is absolutely crucial here.

Meaningful action is also vital in relation to the ongoing Brexit shambles which, as well as having such a huge impact on exporters, is already costing jobs and will continue to do so, compounding the youth and broader unemployment problem as being torn from the EU hits the economy and living standards.

The FSB survey shows more than one in four small UK exporters have halted sales to the EU, and the “vast majority” of firms doing business with customers and suppliers in the bloc have been hit with shipment delays or loss of goods.

The survey reveals 23% of small exporters have temporarily halted sales to EU customers and an additional 4% have already decided to stop selling into the bloc permanently, after the new trading rules took effect at the start of this year.

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Meanwhile, 11% of exporters are considering halting exports to the EU permanently. And 11% have established, or are considering setting up, a presence within an EU country to ease their exporting processes. A further 9% are thinking about securing, or are already using, warehousing space in the EU or Northern Ireland for the same purpose.

The British Meat Processors Association has declared that dismissing trade disruption at the borders as simply short-term “teething problems”, a term used by Mr Johnson, “is no longer credible”.

Publishing a Brexit update last week, it declared: “As we near the end of the first quarter of trading outside the EU single market, British meat companies are painting a very different picture. They are reporting systemic weaknesses in the current export system, mountains of red tape and a potential permanent loss of trade of between 20 and 50%.”

Members of the Johnson Cabinet should note the reference to permanent loss of trade, and the huge proportion. They should also take heed of the large numbers of small businesses which have halted exports to the EU permanently already, or are contemplating doing so, and ask themselves why they chose not to continue frictionless trade and whether a rethink might be in order.

The FSB report shows 70% of importers and/or exporters have suffered shipment delays relating to their trade with the EU in recent weeks. With respondents who said this question was “not applicable” to them removed, the FSB noted the proportion to have been affected by delays was actually 89% for both exporters and importers. Meanwhile, 32% have lost goods in transit. And 34% have had goods held indefinitely at EU border crossings. Of those small businesses which have experienced delays, 36% have suffered hold-ups lasting more than two weeks.

This survey paints a picture of realities on the ground which should spur the Prime Minister and his Government into action. Should rather than will though, you would imagine, given what we have seen thus far.

It is interesting sometimes to hear Brexiters respond to trouble for UK exporters by saying that imports from the EU are being hit too, as if this is a good thing. This strange attitude seems to arise from some pathetic, ideologically based obsession with one-upmanship when it comes to the EU. It demonstrates a total lack of understanding of the detrimental impact of problems with imports for businesses which need key components or supplies and simply for people doing food shopping.

London-based corporate finance advisory firm Oghma Partners last week flagged “systemic” problems from the Brexit deal and the significant damage they are causing to UK food exports.

Mark Lynch, partner at Oghma, declared: “The Government has had four years to prepare for leaving the EU and has failed, despite industry warnings, to do so adequately. It seems it would be better to accept that these problems exist and to seek to rectify them.”

He noted this would be better than accepting “a de facto permanent loss in business”.

This might be obvious to most people, but it seems often that it is not apparent to the Johnson Government or to arch-Brexiters.

It is high time this UK Government stopped pretending that Brexit has been something other than a disaster, and acted to alleviate the damage being done to businesses, individuals and the economy, working together with our long-suffering EU neighbours.

Playing to the gallery and continuing its propaganda war with the EU will only exacerbate the trouble but, sadly, this looks like the sorry path that Mr Johnson and his Cabinet of Brexiters, big on bluster and short on detail, will continue to follow. It is a path which has proved alarmingly popular with a large part of the electorate, and that is a big problem for exporters as they continue to plead for assistance amid the post-Brexit shambles.