By Raz Koroh
Many analysts in the media and also the public at large say that Brexit is a big mistake, that the British Prime Minister should never have asked the British public on whether they wanted to remain in the EU or not. For what is at stake is no less than the fate of the UK economy, which many claim cannot survive without its EU trade links. The doom and gloom scenario is being played over and over again, and most analysts are unanimous in their views that UK trade will only go in one direction – Down.
Here are several factors to consider.
UK-EU trade. Even though the EU is still an important trading partner, the UK’s trade in goods (not including trade in services such as tourism, transport and banking) with the EU for the 2002-2013 period shows a massive drop of 30 percent, from 61.4 percent of its total trade in 2002, to only 43.6 percent of its total trade in 2013. In fact, the EU as a bloc itself has experienced a drop of 9 percent during the same period but nevertheless intra-EU trade still make up around two-third of their total trade. None of the 28 EU economies (except the UK, Greece and Malta) would consider their world trade as more important than their EU trade; Germany (57 percent of its total trade), France (59.3 percent), Italy (53.7 percent) and Spain (63 percent) all consider each other as their most important trading partners. However for the UK, if the trend continues, by 2024 its EU trade will make up only 30 percent of its total trade.
Trade deficit. For the 2002-2013 period, the UK’s export trade with its EU partners declined whereas its import trade rose, resulting in annual visible trade deficits (EUR -79 billion in 2013); only France (EUR -89 billion) showed a higher trade deficit. However, whilst the UK’s export:import ratio with the EU deteriorated from 83:100 (2002) to 69:100 (2013), the export:import ratio of the UK with the rest of the world improved from 69:100 (2002) to 98:100 (2013). This clearly shows that the UK’s visible trade balance in fact benefited increasingly more from its global trade compared to its EU trade. In fact, only twelve of the 28 EU economies show visible trade surpluses, led notably by Germany (EUR 45 billion).
So, the more accurate question analysts should ask is, is the UK at risk of losing its EU trade, or has the EU become increasingly irrelevant to the UK anyway?