How Brexit is Impacting UK's Trade with the EU: An Economic Analysis

Summary

The transcript discusses the impact of Brexit on UK trade, noting the puzzling performance of goods exports which have not declined as expected post-Brexit. It suggests that the UK has missed out on an intra-EU trade boom, resulting in a shortfall in goods exports. The service sector's resilience is also examined, with some areas like financial and transport services showing slower growth, possibly due to regulatory changes and trade barriers. The analysis concludes that Brexit has had a significant impact on trade, potentially affecting GDP.

Takeaways

• 📈 There has been an 'Inu Goods trade boom' that the UK has not participated in, which has affected its exports to the EU compared to intra-EU trade growth.
• 🇪🇺 The UK's exports to the EU have not declined as expected post-Brexit, remaining relatively stable compared to its exports to the rest of the world.
• 🤔 The lack of a significant decline in UK goods exports to the EU, despite imposed trade barriers, presents a puzzle for those who expected Brexit to have a more pronounced negative impact.
• 📊 The comparison of trade data suggests that if UK exports to the EU had grown as rapidly as intra-EU exports, they would be approximately 27% higher.
• 🔍 Sector-specific analysis reveals varying impacts of Brexit, with some sectors like chemicals and automotive goods showing clear negative effects on UK exports.
• 📉 The UK's service exports have been performing well post-Brexit, which is somewhat unexpected given the potential impact of leaving the EU's single market for services.
• 🌐 The gravity models suggest that service trade within the EU should have been more affected by Brexit, but the UK's service exports have not shown a clear decline.
• 📈 The demand for tradable services may have increased due to pent-up demand post-COVID lockdowns, potentially boosting the UK's service exports.
• 💼 However, the UK's financial and transport services have grown more slowly than the average of other advanced economies, suggesting some Brexit impact.
• 📉 The overall shortfall in UK goods exports is estimated at about 13%, and for services, it's about 10%, which aligns with predictions of Brexit's impact on GDP.
• 🤷‍♂️ The final verdict on the extent of Brexit's impact on trade and GDP remains uncertain, with ongoing debates and analyses.

Q & A

What is the main argument presented in the transcript regarding the impact of Brexit on UK trade?

The main argument is that while there has been an intra-EU goods trade boom, the UK has not participated in this boom, which has resulted in a shortfall in UK goods exports to the EU compared to what it would have been if it had grown at the same rate as EU exports to each other.

How much higher would UK exports to the EU be if they had grown as rapidly as EU exports to each other?

If UK exports to the EU had grown as rapidly as EU exports to each other, they would be about 27% higher.

What is the 'synthesized UK economy' mentioned in the transcript?

The 'synthesized UK economy' is a hypothetical model created based on the trade performance of other advanced economies similar to the UK's up to the point of Brexit. It is used to compare and analyze the impact of Brexit on the UK's trade performance.

What is the current shortfall in UK total goods exports as analyzed in the transcript?

The analysis shows a shortfall of about 13% in UK total goods exports compared to the synthesized UK economy.

How does the transcript explain the puzzle of UK goods exports to the EU not performing much worse than those to the rest of the world?

The transcript suggests that the puzzle is explained by comparing the UK's trade to the remaining EU member states, where there are significant differences in intra-EU trade growth compared to the UK's exports to the EU.

What sectors have been particularly impacted by Brexit according to the transcript?

Sectors such as chemicals, automotive goods, and miscellaneous manufacturers have been particularly impacted by Brexit, with noticeable differences in trade performance compared to intra-EU trade.

How has the Brexit affected services exports from the UK?

Despite Brexit, services exports from the UK have been doing quite well, which the transcript suggests could be due to rising demand for tradable services, although it also raises the question of whether they would have done even better without Brexit constraints.

What is the overall shortfall in services exports from the UK as discussed in the transcript?

The transcript suggests an overall shortfall of about 10% in services exports from the UK.

How does the transcript address the impact of Brexit on financial and transport services exports from the UK?

The transcript indicates that financial and transport services exports from the UK have been growing more slowly than the average of other advanced economies, possibly due to regulatory changes and impacts on goods trade respectively.

What is the potential impact of Brexit on the UK's GDP as suggested by the transcript?

The transcript suggests that the impact of Brexit on trade could lead to a hit on GDP, with models predicting somewhere between a 2% to 3% impact based on the shortfalls in goods and services exports.