Brexit effect: Britain’s economy in tough times

UNITED KINGDOM (OBSERVATORY NEWS)

As the UK prepares to leave the European Union (EU) in late January and when trade talks are expected to begin soon, confidence in the British economy has been called into question after three years of turbulence due to Brexit.

– Hard end of 2019

The British Chamber of Commerce (BCC) conducted a survey of thousands of businesses at the end of 2019 to gain insight into business confidence. The indecisiveness and drag on Brexit has done its job.

They found that manufacturers’ investment plans were at their lowest point in the last eight years, while export and domestic orders from factories were negative in two consecutive quarters for the first time in ten years.

“Britain’s economy began to falter in the last quarter of 2019. The fourth quarter was characterized by a slowdown in the dominant services sector with the weakening of all key indicators in the quarter, amid declining household spending and severe consumer pressure. spending, ”said the BCC.

The group forecasts only a 1 percent economic growth in 2020.

“Despite some improvements, indicators in the manufacturing sector remain very weak by historical standards. A bankruptcy services sector along with non-energy production activity point to a pessimistic result for GDP growth in Britain in the fourth quarter of 2019.” , added the BCC.

Services make up 80 percent of the British economy.

Overall retail spending declined 0.9 percent in November and December, with 2019 being the first year since 1995 with a sharp decline in sales, according to the British Retail Consortium (BRC).

“Public confidence in Britain’s trade negotiations will have a huge impact on spending over the next year,” said BRC chief executive Brian Dickinson.

Local media also reported that the four major British supermarket chains experienced difficulties during the Christmas period and lost sales, with the sector experiencing the slowest sales growth in four years – just 0.2 per cent.

Part of it was due to the uncertainty of Brexit, but also to the continued expansion of low-cost Lidl and Aldi supermarket chains.

Last year also saw car sales drop to their lowest levels since 2013, dropping by 2 percent. Brexit uncertainty played a role, but so did the toughening of rules for diesel vehicles.

Bloomberg reported that according to their calculation, Brexit has already caused the economy a loss of 130 billion pounds ($ 170 billion), with an additional 70 billion pounds estimated by the end of the year.

The news site reported that the British economy is now 3 per cent lower than if Brexit had not been voted on, and that it is lagging behind its G7 partners.

Some local media reports are positive. The Daily Express, which is pro-Brexit, is constantly publishing reports of optimism about the future of the British economy.

Following record tourist figures in August and September, the paper reported an expected 6.6 per cent increase in tourism in 2020, linking projected growth to positive benefits of Brexit.

The tabloid acknowledged the decline in new car sales, but reported: “BREXIT will cause a surge in the UK car market as one in six admits that the end of uncertainty will boost their confidence to buy cars after Britain leaves. on January 31 ”.

– Hard start of 2020

On January 9, EU chief negotiator for Brexit, Michel Barnier, said: “No one should doubt the commission’s determination and my determination to continue protecting the interests of the citizens and businesses of the 27 EU member states. and to protect the integrity of the single market. ”

He was referring to EU state aid policy and adherence to its regulatory standards to ensure a “correct playing field”.

Britain’s prime minister, Boris Johnson, has said he wants a “broad free trade agreement that includes goods and services, and co-operation in other areas”, but without regulatory approximation with the EU, and he wants it to do so. end of 2020. He has insisted there will be no additional talks.

“The level of access for British products to our market will be commensurate with the level of ambition of agreement on these rules and standards,” Barnier said, defining the battle lines for next year.

On January 8, new European Commission President Ursula von der Leyen spoke in London ahead of a meeting with Johnson and said: “We will go as far as we can, but the truth is that our partnership cannot and cannot it will be the same as before and it may not be as close as before, because after every election there are consequences and with every decision comes a compromise. ”

“The more divergence, the more remote the partnership will be,” she added.

Von der Leyen also said Johnson’s term was “very tight” and that “you cannot expect to agree on every aspect of our new partnership in 2020”.

This indicates that the EU expects an extension of the talks or a more limited agreement in scope by the end of the year.

After a difficult end of 2019, the economy faces an even more difficult path in 2020.

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