POST BREXIT ECONOMY

 

Britain’s Post-Brexit Economy Is Running on Empty

Sydney Nash Wednesday, Oct. 13, 2021

Two weeks ago, an altercation broke out at a gas station in London and quickly escalated. One of the men involved drew a knife. The other rammed him with his car. As the driver tried to retreat, the first man kicked at his side mirror, leaving it hanging limply as the car reversed back into the street. 

Fights in a major city like London are not unusual, but the cause of this one was: The two men were arguing over access to gasoline that was suddenly in short supply in many parts of the country. And it was by no means the only fight to break out at a gas station that week. 

This was Britain in October 2021, where fuel shortages resulted in long lines outside hundreds of gas stations, leaving many customers impatient and even desperate. 

Moreover, gasoline is just one of many products in short supply. In recent weeks, McDonald’s ran out of milkshakes, while Nando’s, the peri-peri chicken chain, temporarily closed 10 percent of its restaurants, in part because it was unable to source chicken. The British government has warned of a turkey shortage at Christmas. More immediately, there is a 70 percent shortfall in firework supplies, only weeks before Guy Fawkes Night, an annual festival that is celebrated with large displays across the country. 

This is an extraordinary situation for the world’s fifth-largest economy to be in. The government has tried to blame the shortages on the coronavirus pandemic—something, it has taken pains to emphasize, that no one could have predicted—resulting in a shortage of truck drivers that is afflicting countries across Europe. 

The shortage of truck drivers is real—Poland has a shortfall of approximately 123,000 drivers, France 43,000 and Germany up to 60,000, compared to the U.K.’s shortfall of an estimated 100,000 drivers. 

However, only the U.K. is suffering from acute shortages in consumer goods and the fraying tempers that inevitably result.

Of course, the pandemic is not the only systemic shock that the U.K. has experienced this year. It has also chosen to pursue an economic revolution through the erection of trade barriers with the European Union, its closest and most important economic partner. Brexit, as this revolution is known, is an experiment in reverse liberalization the likes of which no other advanced economy has undertaken. While the U.K.’s decision to carry out such an experiment is unprecedented, the consequences of Brexit were easily predictable. Indeed, they were predicted. 

For decades prior to Brexit, the U.K. economy had relied upon an extensive network of highly efficient supply chains that crisscross the EU. Supported by a deep pool of skilled European labor, from which thousands of truck drivers were recruited, these supply chains delivered everything from food and beverages to chemicals, medicines and components for cars—all on a “just in time” inventory schedule that minimized waste and cost, while keeping shelves full, factories running, and the country fueled and fed. 

The consequences of Brexit were inevitable and predicted, but the government’s failure to properly prepare for it was a choice.

Supporting this logistical miracle was a comprehensive set of rules and standards, complemented by information-sharing between national regulatory authorities, and an agreed framework for redress—in other words, the EU’s single market and customs union. Within this ecosystem, the British economy grew, even as it intertwined itself with those of its European neighbors. When the U.K. voted to leave the EU in 2016, it chose to pull itself out of that ecosystem, sacrificing its place within those supply chains and an increasingly integrated European economy.

Since then, businesses, logistics and customs experts, and specialists in international trade and EU law have set out at length what the consequences of this decision would be. Put simply, they argued that Brexit would inevitably damage the British economy, for multiple reasons. Erecting barriers to trade would make it harder for U.K. firms to do business in the EU. Reinstating customs checks would make it harder to replenish stocks with goods from the EU. And ending free movement of people would make it harder to keep key sectors of the economy, including logistics, operational by recruiting workers from the EU. 

To mitigate against this, the U.K. business sector called on the government to pursue a “soft” Brexit and to allow plenty of time to adjust to the new reality that would result. This would have retained some of the integration between the U.K. and EU economies, and helped minimize the sudden disruption to trade that leaving the EU would cause. However, the British government under Prime Minister Boris Johnson chose to pursue the hardest form of Brexit and to do so as quickly as possible. The results have now become clearly apparent on supermarket shelves and at gasoline pumps around the country.

The British government’s response to this growing crisis has been to relax rules regulating truck driver hours, and to offer short-term visas to drivers from the EU. Neither measure gets to the root of the problem. Moving goods in and out of Britain is now more time-consuming, costly and stressful than it was a year ago because the trade barriers that were the inevitable consequence of the Johnson government’s Brexit have brought to a shuddering halt the free and frictionless movement of goods that the U.K. enjoyed when it was a member of the EU. The way to solve the challenges facing the U.K. is to remove those trade barriers.

The reason the Johnson government won’t do so is because it was and continues to be driven by a singular objective—delivering Brexit. The decision to leave the EU has fundamentally changed the British political landscape. The Conservative Party, once the party of business, is now the party of Brexit. It was reelected with an overwhelming majority under Johnson’s leadership in 2019 to “get Brexit done.” Its MPs are unwavering not only in their support for Brexit, but also in their belief that it will inevitably be a success. 

However, it is this unwavering belief that has led the government first to downplay the scale of the economic challenges that would inevitably result from Brexit, and then to rush the extraction of the U.K. from the European Union, leaving itself—and British businesses—without the time needed to properly prepare for what the U.K. is now experiencing. The consequences of Brexit were inevitable and predicted, but the government’s failure to properly prepare for it was a choice.

So long as these true believers continue to occupy 10 Downing Street and the majority of seats in Parliament, the government will choose to ignore the role that Brexit is playing in weakening the U.K. economy, undermining British businesses, breaking vital supply chains, exacerbating labor shortages and creating the kind of conditions that result in violent exchanges at petrol stations. To do otherwise, they would have to question their own belief in Brexit and acknowledge the flaws in what has become an ideology. This is not an option for them, for the simple reason that the Johnson government is a revolutionary one in which ideology trumps all else, even the economy. 

Sydney Nash is a former civil servant, U.K.-EU negotiator and adviser to the automotive sector on Brexit and international tra