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U.K. trade with the European Union deteriorated in the first month since the Brexit split, suggesting commercial relations between the two economies will suffer more than the British government advertised.
U.K. goods exports to the EU fell almost 41 per cent in January from a month earlier, while imports from the bloc dropped 29 per cent, data from the Office for National Statistics showed Friday. The hardest-hit EU imports were machinery and transport equipment, especially cars, and medicinal and pharmaceutical products.
Importers on both sides of the channel built up inventories ahead of the Jan. 1 split, leading to less cross-border freight shipped by air, sea and rail and largely avoiding the prolonged traffic jams that many critics had predicted.
Prime Minister Boris Johnson had insisted any friction suggested by more high-frequency data has been mere “teething problems,” but the evidence from the statistical agencies of Germany, France and Italy indicated there was a hefty drop in shipments from the EU to Britain in the first month after the transition period ended.
“What we don’t know is how much of this is permanent and how much is ‘teething troubles’ and will gradually return,” said former U.K. trade negotiator David Henig, U.K. director of the European Centre for the International Political Economy. “You could possibly attribute a quarter of the changes to stockpiling effects.”
Exports of food and live animals to the EU -- goods that are costly and difficult to stockpile -- plunged 64% from December, potentially due to stricter checks and certifications implemented by the EU at the end of the transition period, the ONS said. The Scottish Seafood Association has pointed to a rise in “red tape” on goods sent from Scotland to France, with consignment sign-off taking six times longer and previously overnight transit now lasting three days.
The government blamed the results on stockpiling, COVID-19 lockdowns, and businesses adjusting to the new arrangements. David Frost, who negotiated the Brexit trade deal with the EU and is now the minister in charge of the U.K.’s relations with the bloc, said it was inevitable the figures would be “unusual” in January and that freight volumes have since returned to normal.
“Many businesses have made the changes needed to trade effectively with the EU, but we are focused on providing active and extensive support to others who need to adapt,” he said in a tweet.
1. I have been looking at today's trade numbers. This month's unique combination of factors made it inevitable that we would see some unusual figures this January. As @ONS has pointed out, caution should be applied when interpreting these statistics.— David Frost (@DavidGHFrost) March 12, 2021
The weak trade figures contributed to the biggest drop in economic output since April. Separate figures released Friday showed U.K. gross domestic product shrank 2.9% in January because of drops in both manufacturing and service industries.