Thursday, 4 May 2017

"Impact of Brexit on Businesses in the UK" NOT

A delightfully misinformed and illogical bit of fear-mongering from Market Inspector:

There are Brexit campaigners who have optimistic predictions for Britain and its businesses. But there are still many sceptics who predict that this has been a big mistake for Britain, and that it will be seriously impacted by multiple factors.

So, how can Brexit affect businesses in the UK? You may be doing business in the UK, but most of your raw materials come from, let’s say Germany, for example. Since free trade between UK and EU will no longer be prevalent, the costs of your supplies hike up...


Only if the UK imposes tariffs, and let's hope it doesn't. Germany doesn't sell much in the way of raw materials, it sells high-end and finished products so that's a non-example. Of course, even with low-ish tariffs, the cost of goods from the rest of the world will go down, so that's a win for manufacturers overall.

According to statistics, in 2015, the UK exported £133 billion worth of goods to the rest of the EU, which is almost equal to half of global goods exports. It is predicted that the UK will experience a loss of at least £4.5 billion a year, if they leave the EU without negotiating a new trade agreement with the EU.

Let's go with that estimate, will UK exports to EU fall by three or four percent? Seem plausible. The key is to make up the difference be selling more to the rest of the world, GBP has fallen since last year which will help UK exporters achieve that.

This could take a major hit on export businesses in the UK, as their costs will hike up with the increased tariffs.

It is up to the UK to impose import tariffs, which would be pretty stupid (i.e. the UK government will probably do it, but we can't blame that on the EU).

It will result in UK businesses being less competitive in the EU markets and globally, as well.

Where does that come from? It's difficult to criticise something that is wrong on so many levels, first of all we'd have to guess what his trail of logic is. Surely, our trade with the rest of the world will not be affected in the slightest? Imagine Malaysia left ASEAN, would we even notice?

The European Free Trade Association (EFTA) was formed in 1960, which the UK was a founding member. If the EU decides to change policies after brexit, it could mean that the UK will lose its access to the single market.

Not sure what EFTA has to do with it. What's all this about losing "access to the Single Market"? A bit like the Chinese, Japanese and all those other major economies with whom the EU has no 'free trade agreements' (yes. it's an oxymoron)?

In a period of 2 years between the Brexit decision and the actual exit of the UK from the EU, the UK must negotiate free trade agreements with the EU and other countries globally.

No it doesn't have to, it's not going to happen in two years if it ever does, we don't need 'free trade agreements' to trade with people, look at the bloody map! And FWIW under normal grandfathering rules, the UK will almost automatically enter into new free trade agreements with South Africa, Mexico and Chile (the only ones of note, Greenland, FFS) on the same terms and conditions.


Economists estimate that Britain will be at a loss equating £75 billion, if they are excluded from the single market.

The first estimate of £4.5 billion lost trade seems uncontentious, the French will see to that. All of a sudden, they've multiplied it up by a factor of twenty. How? Why?

16 comments:

paulc156 said...

Regardless of tariffs costs go up due to disrupted supply chains. This is a far greater concern to most UK exporters. Even our exports are often composed largely {mostly, in the case of UK built cars] of imported components and raw materials.

Lola said...

I don't mind people not agreeing with me. In fact I enjoy it. Even more than that I think that it is very important that people disagree - and not just with me.

But what really, really pisses me off is when their arguments lack any form of logic, or the evidence around them or of history.

Lola said...

p156. Why will supply chains be disrupted? Just why? Could the EU really be so stupid as to put in place barriers to export to the UK?

Mark Wadsworth said...

PC, come off it

L, agreed and agreed. How boring.

Bayard said...

"Could the EU really be so stupid as to put in place barriers to export to the UK?"

Probably. The French will see to it.

paulc156 said...

L.Yes and yes. Q. Would we be so stupid to presume they wouldn't. And of course were you to be consistent you would argue that we should place no additional requirements (retaliatory or otherwise)at ports on incoming and make them look the bad guys.

Mark Wadsworth said...

PC, the EU ARE the bad guys.

We are on the world stage here. Just imagine Northern Ireland voted to secede from the UK and (re)join rep of Ireland (as they are entitled to do).

What would world opinion think if the UK then imposed a trade blockade on new united Ireland?

Same with the UK leaving the EU.

FFS.

Lola said...

P156. Correct. They put barriers up - tariff and non-tariff - and we do not. They are then not just bad guys but very very stupid. And what's more such an action by the EU bureaucrats will undermine their mandate with the member nations as they realise that such tariffs hurt them not us.

Valli said...

The first estimate of £4.5 billion lost trade seems uncontentious, the French will see to that. All of a sudden, they've multiplied it up by a factor of twenty. How? Why?

Please read this:

http://www.independent.co.uk/news/business/news/brexit-economists-put-cost-of-uk-losing-european-union-single-market-membership-at-75bn-a7181376.html

Valli said...


"Let's go with that estimate, will UK exports to EU fall by three or four percent? Seem plausible. The key is to make up the difference be selling more to the rest of the world, GBP has fallen since last year which will help UK exporters achieve that."

A: Much of UK's trade with external partners like US depends a lot on UK being within EU, especially for financial and professional services. Many companies use UK as their European base to export services from.

Valli said...

EU is the biggest trade and investment partner for UK's business. Talking about exports to the EU, businesses in UK will face tariffs not only with EU but also with other countries that EU has trade agreements with. Also, UK will have to pay higher costs for importing from EU after Brexit, as compared to when it was part of the EU. Won't these factors make UK's businesses less competitive?

paulc156 said...

"P156. Correct. They put barriers up - tariff and non-tariff - and we do not. They are then not just bad guys but very very stupid." L

Then you should have said that instead of this "Why will supply chains be disrupted? Just why? Could the EU really be so stupid as to put in place barriers to export to the UK?"

But if that were to transpire it is us who would have been very stupid to have not figured it out even before negotiations began. I think the likes of Davis and May probably are all too aware that this would be an explosive ending if it came to that and are just hoping to avoid such a scenario but for the most part, rabid brexiteers seem to think everyone else but them is stupid...

Valli. The article refers to a £75bn figure 'hit' to the economy but is based on models by a few economic forecasters. Economic models are considered 'fake news' nowadays. The article does refer to Minford's model which sees the economy receiving a boost over a similar time frame but apparently sees UK manufacturing all but disappearing into the bargain, not something any mainstream political party is even remotely willing to entertain.

paulc156 said...

MW. Yes under such conditions the EU will seem like very harsh people indeed to us in the UK, but judging by recent election results and likely ones in Germany, people seem to be remarkably conservative in their political views, at least those who bother to vote and France has all but elected an avowed europhile, Holland re elected one and Germany will do similarly in a few months time. If they pose the issue as one of EU solidarity against the UK wishing to hasten the demise of the EU by seeking special advantages not available to the likes of Norway or even Switzerland, most will accept the EU version and not ours.

Most of this comes down to the position adopted on freedom of movement and as such is self inflicted.

Lola said...

P156 - There was no contradiction in my two comments. They compliment each other.

paulc156 said...

L. It just looked like a case of cognitive dissonance. You first ask could the EU 'be so stupid' as to put in place barriers to exports from the EU into the UK which is the wrong way round unless you are implying that the barriers would be put up by the UK in response to the EU actions, but then claim we should in any case place no additional restrictions on EU imports in response to those EU actions.

This still hurts the UK in terms of possible major disruptions to supply chains and has longer term investment implications for the UK. This route seems to me one where Minford's prediction operates. ie. Manufacturing withers on the vine but we get cheap imports from wherever we want. However we will likely find in such a scenario even service exports somewhat uncertain due to a schism with the EU, from where nearly half our service earnings are derived. So UK Ltd gets poorer unless you really think we can make up losses on exports and investment by getting stuff so cheap from abroad we don't miss the other stuff. Bearing in mind we already have a chronic and persistent balance of payments deficit reflected in steady increases in private borrowing, it sounds like a huge gamble to take. Though Minford seems keen.

Bayard said...

"Most of this comes down to the position adopted on freedom of movement and as such is self inflicted."

Unfortunately xenophobia just works. History shows that, politically, it is a very effective campaigning tool. Possibly, May's Tories were planning on a June election all along, which is why the xenophobia card has not been quietly dropped.