Matthew Lynn

What happened to the great Brexit trade chaos?

What happened to the great Brexit trade chaos?
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The ports would reek from the smell of rotting fish. Factories would close en masse as orders got snarled up in red tape. There would be chaos at the borders as deliveries were blocked, and services would hit a wall of ‘non-tariff barriers’ that would make it impossible for British firms to sell them across Europe. 

We have heard a lot over the last few weeks about how much disruption our departure from the European Union was causing for exporters, and there were lots of stories about firms that might go out of business or would have to move production to France or Poland.

But hold on. The actual data is telling a different story. True, there was some disruption in January. But figures out this morning show that trade has already bounced back. The UK’s exports to the EU rose to £11.6bn in February, up from £7.9 billion in January. Overall, they were only slightly below last year’s £12 billion monthly average. That is a remarkably small difference, given that we were still effectively still inside the EU last year and this year we are not.

We should keep in mind as well that Europe, like us, is still in the middle of lockdown, and in a deep recession, so that will have depressed demand for British exports. But if this month's figures are anything to go on, the impact from leaving the EU may well have been less than £400 million a month.

That demonstrates two things. The first is that membership of the single market, despite all the hype around it, doesn’t make much difference to most exporters. There is no question that it has an impact on a few, especially in sectors such as food and drink where the EU is very strict about what it allows into the bloc (mainly to protect its farmers from any form of foreign competition as it happens). For the vast majority, however, once a few pieces of slightly dull paperwork have been sorted out, it is neither here nor there.

The second is that while there will be a hit to the UK economy from leaving the EU, we now know that it was completely trivial. The ‘lost exports’, which we have been told for the last decade would be catastrophic for the British economy, and would cost us a few million jobs, could come to around £4.8bn a year, not much more than a rounding error for an economy worth £2 trillion (it is about 0.25 per cent of total output). 

In truth, the Brexit ‘chaos’ is already over – and anyone looking back on the whole episode a decade from now may find it hard to work out what all the fuss was ever about.

Written byMatthew Lynn

Matthew Lynn is a financial columnist and author of ‘Bust: Greece, The Euro and The Sovereign Debt Crisis’ and ‘The Long Depression: The Slump of 2008 to 2031’

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