The UK and the EU: Post Brexit

Although the UK voted to leave the EU in 2016, both have agreed to continue to work with similar terms and conditions until 2020. On 24 December EU and UK have reached an agreement on a new partnership. It sets out the guidelines that apply between the EU and the UK starting on the 1st of January 2021.  These new rules cover areas such as travel and border controls, trade services, trade in goods, fair competition, fisheries, social security, and security. 

Since the UK left the EU, it is no longer part of the customs and single market with the EU. Instead, it has a trade agreement that permits zero tariffs and zero quotas on goods. 

Recent developments 

British trade has experienced the biggest monthly decline since 1997 after the Brexit transition period. According to the Office for National Statistics, UK goods exports to the EU dropped by 40.7% and imports by 28.8% in January 2021. This could contribute to a 2.9% decline in the economy. 

Brexit hit most of the exports of food and live animals to the EU. As it resulted in a fall of 63.6% in January. Consignments of fish and shellfish dropped by 83%. As a consequence, there were incensed protests from the fishing industry. However, foods and live animals represent just 7% of the UK exports. 

The price for EU imports has risen which caused friction and surprised British consumers. There were complaints of purchases through social media. However, there was nothing the government could do since the UK was no longer part of the EU. 

The UK small and medium businesses have struggled to adjust to the new trading relationship with the EU. Hence numerous UK businesses stopped exporting to the EU temporarily to sort out what is needed under the new trade exchange. Moreover, British jobs were lost as companies set up warehouses in the EU. This is because many found that goods being brought into Britain and afterward sent out to the EU caused tariffs. Thus making it unattractive to businesses and unviable as a trading hub. However, the government stated that they will give support to those businesses that are still struggling. 

Effect On The Private Sector

It's quite obvious that such a major trade agreement will affect the private sector of both economies. An increase in tariff and diverse competition puts the UK at a disadvantage, which has been observed through the decline in the trade mentioned prior. 

Tesco, a major British supermarket chain has been hit hard by the new agreement. With a recent drop in stock prices and the increased tariffs on fresh produce imported from the EU, Tesco is forced to increase its price. Tesco fears that such an increase will make it lose out to competition within the market. Such is the case for many British companies who depend on imports from the EU. 

As for the exports from the private sector, it's looking worse. Britain, before Brexit, was a major exporter of flour, cereals, and minerals to its neighbor, Ireland. However, after the free movement of goods was stopped, trade dropped by 65℅ within the first month. This in turn caused the British agricultural sector to be dependent on its home market, greatly reducing the income of agriculturists. 

Generally speaking, the British private sector was heavily dependent on the EU for exotic fruits and vegetables, metals and minerals, certain cereals, and electronics to manufacture goods. However, after the borders closed down, acquiring these materials has become expensive. Therefore, a price rise can be expected. 

Conclusion

The future doesn't look bright in the coming months. Till the market stabilizes and companies find new ways to produce goods cost-effectively, inflation is going to be the new normal in British markets. 

The average British citizen will have to face higher prices for daily products they used to take for granted. Things like olives, cotton, metal appliances, and other common household objects are set to get more expensive. Companies based in Britain will have to deal with higher production costs and will have to take effective cost optimization measures. 

However, in the long run, we can expect everything to stabilize and for Britain to emerge with a healthy EXIM environment it once had. 

Written by Aidana Assylbek and Rayandev Sen; edited by Alidar Kuatbekov