Will the pound ever recover from Brexit?
Only self-praise helps : One year after Brexit - how's the UK doing?
Elizabeth Truss is delighted with the status of her country as an "independent trading nation". On the anniversary of Britain's departure from the EU on January 31, she could show deals “with 63 countries and the EU” totaling £ 885 billion (one trillion euros), the London trade minister boasted on Friday: “No other nation has ever done that done so successfully. "
But the best is yet to come: This year she has her sights set on “gold standard agreements” with the USA, Australia and New Zealand.
A little optimism in difficult times, why not? Great Britain is deep in the third corona lockdown, the economy is down. Prime Minister Boris Johnson announced this week that schools and kindergartens, let alone pubs and restaurants, will not open before March.
The hospitals have been operating beyond their capacity for weeks, and the total number of Covid deaths has long been well over 100,000. According to the International Monetary Fund (IMF), the economy contracted by ten percent in 2020, and recovery is likely to be a long time coming this year. Truss ‘happy self-praise may be a little balm.
However, experts do not share the optimism. Three quarters of the trade volume mentioned by Truss is due to the agreement reached with the EU on Christmas Eve, which is a constant headache for many industries on the island.
Four weeks after the final exit from the largest domestic market in the world, complaints from fishermen and pig farmers, mail order companies and freight forwarders about expensive bureaucratic hurdles in trade with the continent are mounting. In the first three weeks of January, the freight volume fell by 38 percent compared to the same period of the previous year.
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The deal with Brussels is only considered a success on the island, "because chaos was avoided," believes Canadian economist Jason Langrish. Apart from that, the British would have mainly updated EU trade agreements (roll-over deals) achieved, but hardly any new agreements reached.
Johnson's plan failed
The most important price for the Brexit Island would be free trade with the US. Last year, Johnson's administration frantically tried to come to an agreement with then President Donald Trump. The plan failed, as predicted by transatlantic veterans. The British ex-ambassador to Washington Kim Darroch believes a deal in the next four years is unlikely, after all, the new President Joe Biden has two bigger prices in mind: a new transpacific agreement and an agreement with the EU.
Meanwhile, Brexit is eating away at the economic foundation. In this quarter, IMF chief economist Gita Gopinath has calculated that the distance from the continent will reduce the island's economic output by around one percent. Over the years, according to the Niesr think tank, growth will be up to 5.5 percent lower as a result of leaving the EU.
However, the negative consequences of Brexit remain hidden in the massive effects of the corona pandemic. Last year the gross domestic product fell by around ten percent. In the opinion of many economists, Great Britain will not have nearly made up for the severe economic downturn until the second half of 2023 at the earliest.
Finance Minister Rishi Sunak has now put the equivalent of 316 billion euros into state aid for employees, the self-employed and companies. The country's deficit has increased immensely, and there is hardly any talk of debt reduction any more.
Due to the temporary waiver of the real estate sales tax (stamp duty), Sunak lost revenues of around 4.4 billion euros and caused a boom in the eminently important housing market. This increased the average price of a property nationwide by 7.6 percent - nice for homeowners, bad for the increasing number of young people and those low-income earners who have to rent in the metropolitan areas.
London lost 700,000 residents
The impending Brexit and the effects of the pandemic resulted in an unprecedented exodus of EU citizens in 2020. London alone lost around 700,000 inhabitants, or eight percent of its population, according to statisticians from the government-backed think tank Escoe. Sectors such as restaurants and hotels, in which many young Europeans worked, have massively cut jobs in the recurring Covid lockdowns.
Brexit is likely to stand in the way of the return of cheap workers: In future, only those who can present a so-called certificate of residence will be allowed to work in Great Britain without a visa.
For the most important international financial center in the world, the agreement on Christmas Eve, which focused on freedom from customs duties, amounted to a chaotic “no deal”. On the first trading day of the new year, stock trading with a value of at least 4.6 billion euros migrated from London to the continent. “The city is losing its strong position,” complains Alasdair Haynes from Aquis Exchange.
Banks headquartered on the island have moved assets worth at least 1.2 trillion pounds (1.36 trillion euros) to the EU since the 2016 referendum, about 14 percent of their assets. The job losses of around 7,500 observed so far are within limits.
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