00:00I think we need to crunch those numbers now. What about the economics of Brexit?
00:05Well, since the actual leave date in early 2020, British exports to the EU have fallen by around 17%.
00:13That's according to UK research group, the Productivity Institute.
00:17Imports from the EU are down by nearly a quarter.
00:21The report says more than half of all product lines the UK previously exported to the EU have disappeared.
00:28Nearly a third of product lines imported from the EU have also gone.
00:33And the financial impact on households has been significant.
00:36When it comes to food, post-Brexit trade barriers have raised prices by 12%, according to researchers at the London
00:44School of Economics.
00:46It is worth noting that the COVID pandemic conflicts in Ukraine and the Middle East have also hurt the British
00:52economy.
00:53So has the biggest economic cost of the past decade been Brexit itself or the uncertainty that surrounded Britain ever
01:01since?
01:02Well, John Do is from the Productivity Institute, which produced some of the data on imports and exports.
01:09Great to have you on the programme.
01:11I want to talk about something that the Bank of England governor highlighted last week.
01:16He said that Brexit has been bad for the UK economy.
01:19Your report seems to reinforce that.
01:22What does that tell us about the impact on growth 10 years on?
01:28Well, the impact on growth has been devastating, to say the least.
01:33I think it's a combination of the Brexit uncertainty that is relatively stronger before the TCA,
01:40I mean, the Trade and Cooperation Agreement, came in in January 2021.
01:44But afterwards, it was its real trade frictions between EU and UK in combination of more uncertainty in different forms.
01:52But the economic consequences of that has been quite negative and is comprehensive across sectors and in many, many regions.
02:00Now, your report found that more than half of UK export relationships with Europe have disappeared.
02:06What does that actually mean?
02:07Which kinds of businesses have stopped trading with Europe altogether?
02:12That is a really good question.
02:14So just to note that this half of the product lines is a counterfactual estimate.
02:20So this is, you know, compared to the situation that Brexit didn't happen,
02:24what would we have access as product lines from both sides in terms of how much UK export to the
02:31EU
02:32and how much we bring from the EU to the UK.
02:36So this is, you know, intangible examples and how many different kinds of cheeses you could buy in the past.
02:41You could have all sorts of flavours with chili, with, you know, blueberry, with all sorts.
02:45But now you probably have cheddar.
02:47So that is because the trade cost has been increasing and the business have to deal with customers' procedures,
02:54rule of origin certificate and regulatory checks.
02:57So on and on, that cost is no longer make the business viable.
03:00Therefore, they have to reduce the product variety and concentrate on the ones that are still profitable.
03:06The businesses that have tended to survive and to thrive are those that had those deep ties with Europe.
03:12Do you think that Brexit has made it harder for Britain's smaller businesses to grow internationally,
03:18those so-called engines of British growth, while larger firms have had the resources to handle it?
03:25Absolutely. I think that's spot on.
03:27So give a very good, you know, very simple example, the BMW Mini production, for example.
03:32You know, we make the frames from France and coming here to the Midlands to make the machinery tools.
03:38And then it goes back to Frankfurt to put on the engines and come back to Oxford to have the
03:43production in the end assembly.
03:45So the BMW Group has, you know, committed £600 million in the whole production.
03:51And that means that the production chain is complex, it's co-owned.
03:55So that means it's not easy to give up this investment.
03:59But relative to that, the small firms would not have that deep production chain and complex ownership.
04:05So therefore, the buffer zone is much shallower and they're more likely to give up.
04:08What does this all mean for Britain's economic reputation?
04:13Is the UK still seen as a predictable place to invest in and to do business with?
04:19Well, I think the real consequence in terms of production and services, you know,
04:23happening in kind of trade outcomes and GDP and productivity outcomes.
04:27But in terms of the reputation as an open economy, with following the rules and respect the principles,
04:35I think the UK is still very much respected and relied upon.
04:39Jun Du from the Productivity Institute.
04:41Pleasure talking to you. Thank you.
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