LONDON (Reuters) – Early signs of unrest that led to Britain’s move to its new, less open trade relationship with the European Union are reflected in economic data.
While the biggest problem for many companies is the COVID-19 pandemic, details from recent studies show that Brexit is adding to the pressure on the economy.
Manufacturers and utility companies have been hit hard by the supply chain and export turmoil, according to data company IHS Markit.
British factories reported the fastest increase in supplier delivery times among the six initial “flash” Purchasing Managers Index (PMI) surveys published by IHS Markit last week for France, Germany , Japan, Australia and the United States as well as the United Kingdom.
“This was largely linked to both the Brexit unrest and very poor international accessibility,” IHS Markit said.
For a graphic of UK factories see the biggest increase in supplier delivery times: PMI
Under a deal struck last month, trade between Britain and the European Union remains exempt from taxes and quotas but the full cessation of new practices means that goods have to be inspected and papers completed. .
Using a phrase that angered many business owners, Prime Minister Boris Johnson described the unrest as “initial problems” mitigated by the COVID-19 pandemic.
Trade experts believe that some of the extra cost and bureaucracy will be permanent. Supporters of Brexit say Britain will benefit in the long run by striking its own trade agreements and creating its own rules outside the EU.
The Brexit turmoil in the first quarter of 2021 was likely to reduce Britain’s economic output by around 1%, International Monetary Fund Chief Economist Gita Gopinath said on Wednesday.
Services companies – which make up the bulk of the British economy and generate surpluses in trade with the bloc – were hit this month, an IHS Markit study showed.
Exports of services in Britain declined faster than in any of the other six PMI flashes published this month, slowing a development trend seen in most other countries.
For a graphic on UK services export orders show the fastest fall in January: PMI
“The service economy was hit hard by trade restrictions and consumer spending declined at the start of the year,” said IHS Markit.
After the initial upheaval, a heavier picture of Brexit costs and benefits appears to emerge over time, although many businesses are not optimistic.
A Confederation of British Industry study published last week showed that British manufacturers’ confidence in their ability to compete in the EU market has fallen to its lowest level since records began 20 years ago.
For a graphic of UK factories see low competition in the EU market: CBI
Reciting with Andy Bruce; Edited by William Schomberg and Catherine Evans