Data for January 2021 was the first to show trade after the transition period ended on 31 December 2020. While some of the fluctuations in trade with continental Europe is due to the effects of the Covid pandemic, the BCC said many firms blame the brexit trade deal for shipping delays, increased cost of transporting goods and extensive new paperwork requirements.
Overview of Post Brexit Trade Statistics
Data published by the Office for National Statistics (ONS) in April are the first indicators of post brexit trade statistics. This is what the ONS has to report.
Exports of goods to the EU, excluding non-monetary gold and other precious metals, partially rebounded in February 2021, increasing by £3.7 billion (46.6%) after a record fall of £5.7 billion (negative 42.0%) in January.
The increases in exports to the EU in February 2021 were driven by machinery and transport equipment and chemicals, particularly cars and medicinal and pharmaceutical products.
Imports of goods from the EU, excluding non-monetary gold and other precious metals, showed a weaker increase of £1.2 billion (7.3%) in February 2021 after a record fall of £6.7 billion (negative 29.7%) in January.
The more modest increase in imports from the EU were driven by machinery and transport equipment, and chemicals, particularly cars and medicinal and pharmaceutical products.
Total imports of goods from non-EU countries, excluding non-monetary gold and other precious metals, increased by £1.7 billion (10.2%) in February 2021 while exports fell by £1.5 billion (negative 10.5%).
The total trade deficit for February 2021, excluding non-monetary gold and other precious metals, widened by £0.5 billion to £1.4 billion; imports increased by £2.9 billion (6.5%) and exports increased by £2.3 billion (5.4%).
The total trade deficit, excluding non-monetary gold and other precious metals, narrowed by £2.1 billion to £6.3 billion in the three months to February 2021; imports decreased by £5.7 billion (negative 3.8%), while exports decreased by £3.6 billion (negative 2.5%).
Trade in services imports and exports have consistently remained at a lower level since Q2 2020 as services accounts such as travel and transport trade continue to be affected by coronavirus (COVID-19) restrictions.
February Trading Trends
Total exports of goods, excluding non-monetary gold and other precious metals, increased by £2.2 billion (9.9%) in February 2021. Increasing exports of goods in February 2021 were driven by a £3.7 billion (46.6%) increase in exports to the EU
Total imports of goods increased by £2.8 billion (8.8%) in February 2021. Increasing imports of goods in February 2021 were driven by a £1.7 billion (10.2%) increase in imports from non-EU countries (Table 1; Figure 1). Imports of goods from EU countries increased by £1.2 billion (7.3%) in February 2021, following a large £6.7 billion (negative 29.7%) fall in January 2021.
Trade for February Explained
Data for January 2021 was the first to show trade after the transition period ended on 31 December 2020. In addition to the changes facing the UK after the transition period ended, England joined the rest of the UK in another national lockdown at the beginning of January 2021, which continued through February. The falls are also consistent with the unwinding of stocks, after businesses stockpiled in November and December 2020 in preparation for the end of the transition period. January 2021 saw significant falls in imports and exports of goods from the EU, particularly in machinery and transport equipment, and chemicals. The 7-day average of daily shipping visits increased from 290 visits on 31 January 2021 to 344 on 28 February 2021. ONS expects shipping indicators to be related to the import and export of goods, and therefore these early indicators suggest partial recovery, consistent with the increases seen in February trade figures. Despite the evidence of partial recovery from the substantial January falls in some commodities, it is still too soon to determine to what extent the monthly changes in trade for January and February can be directly attributed to the end of the transition period. Evidence from the Business Insights and Conditions Survey (BICS) suggested that additional paperwork and higher transportation costs were the biggest challenges facing UK importers and exporters in February, which most businesses attribute to leaving the transition period. However, trade patterns are likely to also reflect the impacts of the unwinding of stocks, coronavirus (COVID-19) pandemic restrictions, and lower demand due to the UK and global economic recession. It is too soon to be able to assess to what extent recent trading patterns are short-term or reflect more lasting structural changes.
Chemical Trade Stockpiles
Although imports of goods from the EU did increase in February 2021, they were not as large as goods exports to the EU. Where the UK would commonly import more from EU countries in commodities like chemicals, in February 2021 increasing imports of chemicals were driven by imports from non-EU countries. Total imports of chemicals increased by £0.8 billion (19.5%) in February 2021, with only £0.1 billion (4.0%) of that increase coming from EU countries (Figure 2). Goods from the EU were stockpiled in November and December 2020, particularly chemicals, in preparation for the end of the transition period, and UK businesses may still be running down these stocks before importing more. Additionally, exports to the EU from the UK have been subject to new border controls since 1 January, but similar import checks were originally not scheduled to be introduced until 1 April. It is possible that traders in the EU may have paused exporting to the UK to wait for the new systems to settle in before continuing with trading.
Imports of machinery and transport equipment (including cars) from the EU increased by £0.3 billion (4.8%) in February 2021, a small increase relative to the fall seen in January (Figure 3). The car and electrical industries worldwide are suffering from a shortage of microchips, first caused by a temporary delay in supplies and now by a surge in demand driven by changing habits. Ford has said profits could be hit by up to $2.5 billion this year due to chip shortages, while Samsung has said that the company will have to postpone the launch of its new smartphone. Car industry production was significantly impacted by the coronavirus (COVID-19) pandemic in March to July 2020, and recent estimates are likely to reflect the impact of reintroduced restrictions.
Rise in Exports of Cars
Increased exports of goods in February 2021 were largely seen in machinery and transport equipment, and chemicals to the EU. Total exports of machinery and transport equipment increased by £1.0 billion (12.3%) in February 2021, driven by a £1.3 billion (41.8%) rise in exports to the EU. The increase in exports of machinery and transport equipment to the EU was driven by a £0.2 billion (26.3%) rise in exports of cars. The monthly export of cars to the EU in February 2021 was at similar levels to what was seen in February 2020.
Coronavirus Adjustments Drives Demand for Electric Vehicles
Despite an increase in car exports, the latest figures from the Society of Motor Manufacturers and Traders (SMMT) suggest car manufacturing for exports decreased 8.1% between January and February 2021. This is due to the ongoing impact of the coronavirus (COVID-19) pandemic as showrooms remain closed in the UK and across Europe. Despite the ongoing pandemic challenges, the EU remains the UK’s largest car buyer as demand for UK vehicles remains high. Despite the 14.0% fall in overall UK car production, production for electric vehicles, plug-in hybrid and hybrid vehicles increased by 25.3%, suggesting that government initiatives such as the introduction of Clean Air Zones and improved charger infrastructure are driving demand for electric vehicles.
Total exports of chemicals increased by £0.5 billion (13.4%) in February 2021, with a £0.9 billion increase in exports of chemicals to EU countries, specifically Belgium. This increase in exports of chemicals to Belgium was largely seen in medicinal and pharmaceutical products. Countries in Europe began to see significant rises in cases of the (COVID-19) coronavirus throughout February, increasing demand for medical products.
Short Term Impacts on Food and Live Animals Largely Answered
Exports of food and live animals to the EU increased by £0.3 billion (77.4%) in February 2021, after being significantly impacted in January (Figure 4). Exports of fish and shellfish to the EU also saw an uptick in February 2021 as exporters adjust to new regulations following the end of the transition period. The disruptions to food exports in January 2021 appear to have largely been overcome and may have only had short-term impacts on trade.
Fuel Trade Falls
Removing the effect of inflation, trade in goods commodities volumes largely followed the same trend as current prices. An exception to this was trade in fuels, which saw decreases in February following an erratic 2020 picture. In February 2021, imports and exports of fuels fell by £0.7 billion (19.5%) and £0.5 billion (6.9%) respectively.
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