Brexit: Five Charts Show The Impact On The UK Economy This Year

Expect a 3-4% hit to UK manufacturing output in January, though the jury's out on how much was solely down to Brexit-related disruption. The pandemic, stockpiling, and December's Covid-related port chaos will also have played their part. Still, data suggests the new trade frictions are still weighing on exporters and that's unlikely to change fast.

GDP data will give a more concrete sense of Brexit-related strains

Friday’s UK GDP data is unlikely to be pretty. The imposition of a new strict nationwide lockdown at the start of January will inevitably see a sharp fall in monthly output as a range of consumer services sectors were shuttered. Meanwhile, higher Covid-19 prevalence and school closures meant staff shortages became more of an issue for businesses. All in, we think we’re looking at a 5% fall in January GDP. 

None of that, admittedly, will come as much of a surprise. But Friday’s data is arguably still relevant because it will give us the first, concrete sense of the damage from the switch to new EU-UK trade terms at the start of the year. Despite a deluge of news reports detailing the difficulties faced by businesses, the data we’ve had so far has sent mixed signals on how bad it’s been on aggregate.

Here’s a brief look at what we know so far…

Traffic between the UK and EU was noticeably lower

Firstly, we know that the number of shipments moving across the UK-EU border fell sharply in January. That’s evident in lorry traffic data from Dover, obtained by the BBC, which shows it was considerably lower than normal through the first few weeks of the year. Anecdotal evidence also suggests many lorries heading back to the continent were empty (worth remembering here that around 85% of haulers on the Dover-Calais route are EU-based). 

All of this tallies with trade data that has begun to emerge from Europe. French data shows a 20% decline in imports from the UK in January as trade frictions were introduced, while imports from the rest of the world increased. Data from the German and Italian statistics agencies suggest similarly dramatic falls.

French trade data shows a clear 'Brexit effect' in January

(Click on image to enlarge)

Source: Macrobond, ING

Manufacturing data shows less of an impact

However, the picture appears slightly less dramatic when looking at UK manufacturing indicators, which alongside agriculture, is arguably where much of the initial sector-specific impact would likely show.  

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