In post-Brexit era, the UK making slow but steady progress on its trade strategies

[LONDON] Nearly three years to the day since Brexit happened and Britain officially withdrew from the European Union (EU), the UK government’s trade strategies are nurturing some promising growth shoots, although there are still many concerns among businesses.

According to latest available data, there are currently 71 global trade accords that the UK has with other nations, accounting for about £814 billion (S$1.3 trillion) of bilateral trade in 2021 but covering only 60 per cent of global trade. Since Brexit, the UK inked new free trade agreements (FTAs) with only four major partners – Australia, Japan, New Zealand and Singapore.

The EU-UK trade and cooperation agreement, which governs the relationship in the post-Brexit era, entered into force in May 2021 and covers all of the UK’s trade with the EU.

Not everyone is as optimistic about life in this post-Brexit era, however. A recent survey of 1,168 businesses conducted by the British Chambers of Commerce in the UK found that over three quarters of respondents feel that the trade agreement has made it more difficult to increase sales and grow their business.

More than half, or 56 per cent, of companies noted difficulties in adapting to the new rules for trading goods, while 80 per cent experienced a rise in the cost of imports. Forty-four per cent of companies also said they had problems in obtaining visas for their employees.

These are among the many challenges that the UK government led by Prime Minister Rishi Sunak will need to address this year, as the clock ticks towards the next general election that will likely be held sometime in the second or third quarter of 2024.

Some economists estimate that Brexit has dented economic growth by 4-6 per cent. Such calculations, however, are difficult to quantify as the fallout from the Covid-19 pandemic and the impact of the ongoing Ukraine war have also caused massive shortages and caused inflation to soar.

Official data from the government showed that, in 2021, the UK exported £267.4 billion worth of goods and services to the EU – about 42 per cent of its global total. Imports from the EU bloc accounted for £292.2 billion, which showed once again that terms of trade have been in favour of EU nations for years.

The UK is deep in discussions with India on a new bilateral FTA, along with other similar deals with Canada, Mexico and Israel, among others. Last month, the Department for International Trade launched a public call for input on a future FTA between the UK and South Korea.

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In some better news, the UK is likely to become the first new country to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which currently includes Singapore, the United States and nine other Pacific Rim nations. The last round of negotiations on this took place in London in early December and an agreement is expected to be reached in the first half of 2023.

The CPTPP deal is one that’s vital for the UK. A trade strategy document noted that almost 90 per cent of global economic growth is expected to be outside the EU over the next five years.

The document added that 65 per cent of the world’s 5.4 billion middle-class consumers will live in Asia by 2030, and about 100 million consumers in the CPTPP member nations are significant buyers of British products today.

The UK already has FTAs with a number of CPTPP countries, including Singapore but not the US. Critics say that one of the failures of the government under former premiers Theresa May and Boris Johnson was to not take advantage of FTA offers from former US president Donald Trump when he was in office from 2017 to 2020.

The US is Britain’s largest trading partner, accounting for 16 per cent of the UK’s total goods and services trade. The UK has a surplus with the US, as exports to the US amounted to £142.3 billion in the 12 months ended June 2022 against imports of £92.4 billion. In 2020, US foreign direct investment in the UK was £479.2 billion, or 24.8 per cent of the total.

Negotiations with Washington on an ambitious bilateral FTA started in May 2020 but have since hit a wall over several issues. In the meantime, the UK’s Minister of State at the Department for International Trade Greg Hands is busy pursuing trade deals with individual US states. The likes of Indiana, North Carolina and South Carolina have agreed to do so already, and Hands has said he is hopeful that California and Utah will join that list soon.