Economic Commentary: Brexit, Restaurants, Boeing and Airbus
IN THIS ISSUE:
- Brexit: A Midyear Update
- Food For Thought
- Boeing and Airbus: Clear For Takeoff
The Summer Olympics are just around the corner, with four new sports (karate, skateboarding, sport climbing and surfing) set to make their Olympic debuts. Kicking cans down a road is not an Olympic sport; but if it were, the United Kingdom (U.K.) and member nations of the European Union (EU) would have fought for gold. The ongoing dispute between them is leaving the respective economies behind the pack.
Five years on from the Brexit referendum and six months since the U.K. left the EU, the two sides are still trying to finalize several important conditions of the divorce. Since their separation, relations between Britain and the rest of Europe have become increasingly complex: tensions have arisen over Northern Ireland, fishing rights, financial services and vaccine exports, among other things.
Brexit has created barriers to trade and cross-border mobility, causing disruptions in supply chains. Goods entering the EU from the U.K. must comply with new customs declarations, rules of origin, product safety standards and inspections. According to Britain’s revenue authority, new import and export declarations will likely cost U.K. firms £7.5 billion per annum. While commerce between Britain and the EU is tariff-free, an analysis by the University of Sussex found that British businesses have paid to £3.5 billion in tariffs to the EU since the start of the year; many exporters simply weren’t prepared to file for the relief available to them.
In February’s IHS Markit/CIPS survey, British manufacturers reported a near-record increase in supply chain disruption and rising costs. Some of this was due to COVID-19, but Brexit also played a heavy hand. With no time to transition (since the exit agreement was struck just a week before exit), businesses have been hit hard.