So it was just a blip after all. Remember those huge headlines last month revealing that exports to the EU had plunged by 41 per cent in January, leading frustrated remainers to bleat: we told you so? 'Brexit – the unfolding disaster' tweeted Lord Adonis for one, along with a graph showing the sharp fall in January.
Now we have the figures for February, which has been reported rather less loudly, but which show just as strong a rebound. Exports in goods to the EU in February, records Her Majesty’s Revenue and Customs, were 56 per cent up on those in January. They are still down 11.6 per cent on February 2020, but then that is largely a reflection of the effect of Covid on the economy – the entire UK economy is nearly 8 per cent smaller than it was before Covid.
Total exports, including services, rose by 46.6 per cent in February, following a fall of 42.0 per cent in January.
In order words, the blip in January was exactly what many said it was at the time: a case of inventories being unwound after heavy stockpiling in November and December. Businesses anticipated teething troubles and so wisely bought forward to purchase goods so that they wouldn’t be relying on spare parts etc being delivered in the first few days of 2021. It didn’t help that France and other EU countries briefly stopped all lorry traffic from the UK in response to fears over the Kent variant of Covid. At the turn of the year the haulage industry was still suffering the after-effects of the huge jams that built up just before Christmas.
Now that things have settled down we have a better picture of what Britain’s post-Brexit trading relationship with the EU will look like. One surprise is that it seems to have narrowed our trade gap with the EU in goods. Imports in goods rose by a much lower rate of 11.9 per cent in February. Year on year – again bearing in mind that this is comparing the post-covid economy with the pre-covid one – Britain’s goods exports with the EU have fallen 11.6 per cent and imports 14.7 per cent. That is still a long way from eliminating the trade gap – in February 2021 we still had a trade gap of £4.7 billion in goods. But it does put to rest some of the fears that a protectionist EU would find someway of loading its free trade agreement with the UK in order to disadvantage UK exporters. It has found some ways of doing this, such as banning British shellfish from EU markets unless they are first purified. But overall, evidently, UK exporters have not come off worse than their EU counterparts.
There seems to be evidence of some importers turning to sourcing goods from non-EU countries. Overall, UK imports in goods were 9.6 per cent lower in February 2021 compared with February 2020. While EU imports fell by 14.7 per cent, however, those from outside the EU fell by a relatively modest 4.6 per cent. It is very hard to disentangle all this from the effects of Covid, however. There have been huge shifts between individual countries, too. Imports from China surged by 71 per cent over the year; those from the US plunged 27 per cent. While at first that might suggest that China has been a huge winner from Covid, it has to be remembered that February 2020 was a particularly hard time for China. At that stage, the Chinese economy was hugely impacted by Covid, with many factories closed – while Europe and the US had yet to be struck.