Brexit: Predictions versus reality

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With just days to spare before the transition period between the UK and EU came to an end, a post-Brexit agreement on trade and other issues was agreed.

More than 1,000 pages of text outline how the relationship will operate including rules defining fair trade, product standards, financial services, dispute resolution, travel, data, security and of course, fishing rights. But after months of negotiations, is it a good deal for the UK?

For those trading with the EU, there are no taxes on goods (tariffs) or limits (quotas) which must be a welcome relief as we grapple with the impacts on business of lockdown version 3.0. Having a deal in place means that the fear some goods could become more expensive has been avoided. However, there are, of course, new checks and customs declarations to contend with that will inevitably lead to disruption and increased costs.

Marks & Spencer is one of the latest companies to warn of the increased administrative burden and whilst there are some reports of confusion and delays at the ports, Transport Secretary Grant Shapps has reportedly told the BBC that it was estimated only about 1% of trucks have turned up at ports without the correct paperwork. Far less than the doom and gloom mongers were predicting pre-Christmas.

For those businesses providing services, including ourselves, we have lost our automatic right of access to EU markets and we will need to comply with the regulations in each individual country. Arguably, this is similar to the situation we face when providing services overseas to non-EU markets and in common with traders, will inevitably lead to increased red tape and associated costs.

Consequently, economists continue to warn that the cost of Brexit is substantial. Economists at Citigroup estimate that the UK economy will produce 2% to 2.5% less in 2021 than it would have with an extension of ties with the EU. Whilst these economists may well be right, forecasts are inherently wrong, and it is possible that with a no-deal Brexit avoided and economic certainty, we will outperform these predictions.

Ultimately, the European single market revolves around the free movement of goods, services, people and capital and, as I see it, the deal looks like it maintains the freedom of goods and capital, and restricts the freedom of services and people. Knowing that on balance we import goods and export services, time will tell if this balance works in our favour.

What is known is that we voted for and now have a sovereign nation and with that we have the ability to make decisions within our borders without external interference. We are therefore able to negotiate our own deals with the rest of the world and it is thought that should give us a competitive advantage to the deals we might otherwise have had as part of the EU.

With that in mind, in my opinion, it is too early to conclude on whether Brexit will ultimately be a good or bad thing for the UK. What is clear, is the deal done over Christmas puts us in a better position with our closest geographical trading partner than a no deal result under World Trade Organisation rules, and so far, we appear to have avoided mass disruption to supplies at our ports.

For more information on international trade for your business, contact Scott Lawrence at [email protected] or 01242 680000.