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Highlights
- The true economic impact of Brexit is still unclear after a year of Britain leaving EU.
- Britain has been facing labour shortages ever since it left the EU.
- Brexit has created a lot of supply chain constraints in the UK.
It has been a year since Britain has left the European Union (EU), and its impact on the economy is still not clear. When Covid-19 hit the world at the same time as Brexit, the UK saw more than expected tougher situation. While some big firms have adapted to the changes post-Brexit, small food exporters are facing a sharp increase in costs along with labour shortage in transport and hotels. It might take years for the revelation of the true economic impact of Brexit as many companies are still waiting for the resolution of internal differences in the UK regarding the direction of Brexit.
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One year of Brexit
Facing the brunt of the pandemic along with Brexit, the UK has been quite vulnerable and hurt this year. With cars waiting for fuel outside empty gas stations, customers waiting for supermarket shelves to fill up with grocery staples, and households getting trapped in fuel poverty looking for extra blankets to survive the rough winter with rising heating bills, the UK has had a bleak year.
© 2021 Kalkine Media®
It was expected that the year 2021 will be a game-changing year for the UK where it be shine as a confident free trader, but in contrast the year saw a string of unfortunate events, along with catastrophic impact of the pandemic. Dozens of energy suppliers in the UK have collapsed this year which has led to a full-blown energy crisis. As Britain left the EU at the start of 2021, the labour shortages started affecting many sectors. The significant shortage of HGV drivers has created a lot of supply chain constraints in the UK.
In September, the UK Government planned to issue short-term visas for truck drivers and poultry workers, however, the measure was insufficient to fill the labour gap as per businesses. Labour shortfall has been witnessed across sectors, ranging from agriculture to hospitality, but immigration won’t be the likely solution for it.
With the rising inflation levels in 2021, touching a 10-year in November, the Bank of England (BoE) has decided to raise the interest rates for the first time in three years to counter the inflationary pressure. The year is expected to end with inflation levels over 3%, which is above the BoE’s 2% target, and is anticipated to stay at this level until mid-2022.
The UK’s dependence on trade was the major reason people supported Brexit, expecting the country to become free from the EU and trade freely with countries across the globe. However, with leaving EU and dealing with the economic disruptions due to the pandemic, the destruction of the UK economy has been amplified. The UK depends on natural gas imports for heating and electricity generation, and while exports from Russia to Europe have fallen, the domestic gas prices have risen by four times this year, further hurting the UK households. The situation might get better with the opening of the new gas pipeline, Nord Stream 2, connecting Russia to Germany.
The food supply chain has been majorly hit as a result of Brexit, and the export of beef, pork, lamb, and poultry by Britain has been made even more difficult under the new post-Brexit trading rules. The hospital supply chain has also been negatively impacted, while the supermarket shelves are empty ahead of Christmas and New year.
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Bottomline
After a robust vaccination drive in the first half of the year, Britain’s failure to maintain its supply chains has been quite evident in the second half as the economy reopened. After Brexit leading to labour shortages, wages have gone up, and so have prices. People who left the country during the pandemic have been struggling to get in after Brexit due to stricter visa rules. With inflation going up and growth slowing down, the UK has faced a tough year, and is hoping to have a better upcoming year.
