Supporters of Brexit, especially the more mendacious ones like Farage, whose manifesto pledge has a £38bn black hole (according to Tax Policy Associates), are making much of the fact the UK has risen from the 7th largest exporter to 4th largest since Brexit; however, they're misattributing the reasons for that growth, sometimes through genuine ignorance, but occasionally very purposely. I heard Farage saying this on a Radio 4 interview on Monday and, while he was eviscerated on other statements, this one wasn't challenged.
How does one square the circle of a 5% hit on GDP and an overall growth in exports? Continue reading and you'll find out - I've been doing some analysis.
The UK's rise to the 4th largest exporter post-Brexit, from 7th previously, contrasts with its performance in the manufacturing sector. Before Brexit, the UK was the 9th largest exporter of manufactured goods globally, but this ranking has since fallen to around 12th to 13th (GOV.UK, Office for Budget Responsibility). This decline in manufacturing is due to new trade barriers with the EU, component shortages, and other global trade dynamics (Office for Budget Responsibility, Institute of Economic Affairs).
Conversely, the UK's overall export ranking has improved primarily due to the growth in services exports, which are not subject to Brexit export tariffs. Sectors like consulting, financial services, and research & development have been particularly resilient and expanding, significantly contributing to the UK's improved export position (CityAM, Office for National Statistics).
The fact services do not suffer from Brexit tariffs allows them to thrive, despite the new trade environment. This divergence highlights the differing impacts of Brexit. Highly skilled labour in the services sector has benefitted from continued growth and increased global demand, whereas low-skilled manufacturing has faced greater challenges. Additionally, low-skilled workers in manufacturing cannot easily transition to highly skilled services jobs, exacerbating the economic divide and leading to a more complex and nuanced economic landscape for the UK post-Brexit. The upshot is that those most affected by Brexit have been the low-skilled, low-paid.
The growth in the services sector would have happened anyway, as it was unaffected by Brexit tariffs. To suggest that growth is due to Brexit is misleading, to say the least. Some of it was also due to the fall in sterling since 2016, being some 16% against the dollar and 13% against the Euro, making services cheaper. The decline in manufacturing, however, is directly attributable to Brexit, although buffered slightly due to the same fall in sterling.
Had Brexit not happened, it's indubitable that Britain's exports would be even better, probably to the tune of more than the 5% GDP deficit that economists believe has happened due to Brexit, although it's impossible to say whether we would have been 2nd or 3rd, rather than 4th (it depends on the gaps between the ranking positions and the top slots are taken by massive economies, such as China and the USA, which are many multiples of the UK's export revenues).
So, whenever you see someone crowing about export trade having grown and attributing it to Brexit, you can now point out the ignorance of their position.
2 comments:
Tim Harford on More or Less this morning pointed out thatthey had analysed this statement a few weeks back and that there was a major discrepancy caused by the import and export of gold (because the UK is a major centre of precious metal trading). This says nothing about the UK export economy at all because we aren't exporting anything we've mined or made - it's just throughput. If you leave out gold, our position hasn't really changed much at all.
Thanks Anon.
"The upshot is that those most affected by Brexit have been the low-skilled, low-paid." who are core ReformUK and angry at their lot which is apparently entirely caused by forrinners!
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