Brexit disruption to shave 0.5 per cent off GDP as UK starts its recovery
Post-Brexit disruption to UK-EU trade will reduce the UK’s first quarter GDP growth by 0.5 per cent, according to the government’s budgetary watchdog.
The Office for Budget Responsibility (OBR) said in its forecast today that customs disruptions at the EU border and a drop in the number of lorries travelling between the UK and EU meant Brexit is having a larger effect on economic growth than previously expected.
The forecast predicted UK GDP growth of 4 per cent this year and over 7 per cent next year as the UK drops Covid restrictions.
However, OBR data shows that Heavy Goods Vehicle (HGV) traffic around Dover was 10 to 15 per cent lower in the second half of January than one year earlier.
The report said: “Taking all these factors into account, we now expect the temporary near-term disruption to EU- UK goods trade to reduce GDP by 0.5 per cent in the first quarter of this year.
“This reflects both that exports appear to have been hit harder than imports and that the trade disruption will affect UK supply chains.
“As firms on both sides of the Channel grow accustomed to new trading arrangements, this disruption dissipates, though further disruption is possible when the UK enforces the agreement in full on its side of the border later in the year.”
Firms exporting from the UK to the EU have to navigate a series of customs declarations and red tape now the UK has left the bloc’s single market and customs union.
There are also now checks at the borders for some goods, including for some agricultural goods.
While the UK has delayed implementing all checks until July, the EU is already forcing exporters to navigate the full swathe of customs changes.
This has meant border delays and wasted shipments for some exporters, with seafood and meat producers particularly hard hit.
A recent British Chambers of Commerce/moneycorp survey showed that 23 per cent of exporters want to “either reduce their activity in the EU or have no activity at all” in the next 12 months due to the new regulations.