Britain pays heavy price for leaving Europe

January 12, 2021 10:17
Photo: Reuters

On January 1, Britain left the European Union and is already paying a heavy price, in loss of business to the City of London and a sharp fall in trade with Europe and Ireland.

Last week Bank of England Governor Andrew Bailey said that the trade deal stuck with the EU in December would end up costing the UK economy more than 80 billion pounds. In the long term, the country’s GDP will be up to four per cent lower than if it had remained in the EU, he said.
In the City of London, the first impact was the loss of six billion euros in euro-denominated daily trading to Paris and Amsterdam. In the months up to December 31, the City lost an estimated 1.2 trillion euros in assets and 7,500 jobs to Frankfurt, Paris, Dublin and other financial centres.

Another immediate effect is the flow of cargo from Britain to the Europe. So far lorry traffic between Dover and Calais, the shortest route, has fallen to 50 per cent of normal January levels. Drivers and companies face complicated customs, safety and security documentation. With the deal signed only at Christmas, they have had no time to prepare.

In addition, 25 per cent of vehicles going from the Welsh port of Holyhead to Dublin, the Irish capital, were not ready. Over the last week ferry operator Stena Line cancelled 12 sailings on the Holyhead-Dublin and Fishguard-Rosslare routes to Ireland.

Currently, 150,000 lorries each year pass through the UK “land bridge”, taking goods between Ireland and Europe. Now Ireland plans to increase direct freight shipments to French, Belgian and Dutch ports, in order to avoid delays entering and leaving British ports.

The trade deal will require an estimated 215 million extra customs declarations a year. The cost and complexity have persuaded some UK companies to give up the EU market completely. Aston Chemicals, which imports and distributes specialist chemicals for leading cosmetic brands, sent its last shipment to Europe on December 18. It has been trading with the EU for 30 years. Instead, it has set up a subsidiary in Poland which will deal directly with its European customers.

Make UK, a manufacturing lobby group, said that the number of British firms exporting will drop a year-on-year 14 per cent in the first quarter of 2021, with the number of firms in the motor vehicles sector forecasting an export fall of 33 per cent in the same period, compared to an increase of 20 per cent in the last quarter of last year.

For supporters of Brexit, however, these economic losses are a painful but necessary price to win back its sovereignty and independence and control of immigration. They say that the UK can now negotiate trade deals on its own with countries around the world. So far it has secured 60. In 1930, British leader Sir Winston Churchill said: “we are with Europe, but not of it.”

The other risk of Brexit is the end of the United Kingdom. Scotland First Minister Nicola Sturgeon wants to lead her country to independence and back into the European Union. In the June 2016 referendum, 62 per cent of Scots voted to remain within the EU and 38 per cent to leave.

Sturgeon’s Scottish National Party (SNP) holds 61 out of the 129 seats in the Scottish Parliament and 47 of the 59 Scottish seats in the British Parliament. She wants a second referendum on Scottish independence; but British Prime Minister Boris Johnson has refused. In the previous one, in 2014, Scots voted 55-45 against independence – on the assumption then that Britain would remain in the EU. Last weekend Ian Blackford, leader of the SNP in the British Parliament, said the government should pay billions (of pounds) in compensation to Scotland for lost trade and growth as a result of Brexit.

In May this year, the Scottish Parliament is due to hold new elections. Opinion polls show the SNP increasing its number of seats. Another factor working in Sturgeon’s favour is Johnson’s poor management of the Covid pandemic, with total deaths in Britain close to 80,000.

Another possible outcome of Brexit is the loss of Northern Ireland. In the 2016 referendum, its people voted 56 per cent to remain in the EU and 44 per cent to leave. The Brexit deal throws up barriers between Northern Ireland and the rest of Britain. With no border on the island of Ireland, those selling to Northern Ireland have to show their goods will not enter the rest of Ireland, which would make them subject to tariffs.

In addition, farmers in Northern Ireland no longer enjoy the benefits of the Common Agricultural Policy of the EU, which has poured billions of euros into the region since 1973. It is not clear what will replace it.

The question for people in Northern Ireland will arise: is their region better off economically with the Republic of Ireland within the EU or as part of Britain?

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A Hong Kong-based writer, teacher and speaker.